We Ran A Stock Scan For Earnings Growth And Anhui Huaheng Biotechnology (SHSE:688639) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Anhui Huaheng Biotechnology (SHSE:688639). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Anhui Huaheng Biotechnology with the means to add long-term value to shareholders.

Check out our latest analysis for Anhui Huaheng Biotechnology

How Fast Is Anhui Huaheng Biotechnology Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, Anhui Huaheng Biotechnology has achieved impressive annual EPS growth of 42%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It's noted that Anhui Huaheng Biotechnology's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Anhui Huaheng Biotechnology maintained stable EBIT margins over the last year, all while growing revenue 32% to CN¥2.0b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Anhui Huaheng Biotechnology.

Are Anhui Huaheng Biotechnology Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Anhui Huaheng Biotechnology insiders have a significant amount of capital invested in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at CN¥5.4b. This totals to 28% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Anhui Huaheng Biotechnology, with market caps between CN¥14b and CN¥46b, is around CN¥1.5m.

The Anhui Huaheng Biotechnology CEO received CN¥1.0m in compensation for the year ending December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Anhui Huaheng Biotechnology To Your Watchlist?

Anhui Huaheng Biotechnology's earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Anhui Huaheng Biotechnology certainly ticks a few boxes, so we think it's probably well worth further consideration. However, before you get too excited we've discovered 3 warning signs for Anhui Huaheng Biotechnology (2 are concerning!) that you should be aware of.

Although Anhui Huaheng Biotechnology certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Chinese companies that not only boast of strong growth but have also seen recent insider buying..

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.