If EPS Growth Is Important To You, Shandong Sunpaper (SZSE:002078) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Shandong Sunpaper (SZSE:002078). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shandong Sunpaper with the means to add long-term value to shareholders.

Check out our latest analysis for Shandong Sunpaper

Shandong Sunpaper's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shandong Sunpaper managed to grow EPS by 9.0% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

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. Shandong Sunpaper reported flat revenue and EBIT margins over the last year. That's not a major concern but nor does it point to the long term growth we like to see.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Shandong Sunpaper's future EPS 100% free.

Are Shandong Sunpaper Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CN¥41b company like Shandong Sunpaper. But we do take comfort from the fact that they are investors in the company. With a whopping CN¥412m worth of shares as a group, insiders have plenty riding on the company's success. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Shandong Sunpaper with market caps between CN¥29b and CN¥87b is about CN¥2.1m.

Shandong Sunpaper's CEO took home a total compensation package of CN¥928k in the year prior to December 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Is Shandong Sunpaper Worth Keeping An Eye On?

As previously touched on, Shandong Sunpaper is a growing business, which is encouraging. The fact that EPS is growing is a genuine positive for Shandong Sunpaper, but the pleasant picture gets better than that. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. It is worth noting though that we have found 1 warning sign for Shandong Sunpaper that you need to take into consideration.

Although Shandong Sunpaper certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Chinese companies that not only boast of strong growth but have strong insider backing.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com