Do Shandong Humon Smelting's (SZSE:002237) Earnings Warrant Your Attention?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Shandong Humon Smelting (SZSE:002237). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shandong Humon Smelting with the means to add long-term value to shareholders.

See our latest analysis for Shandong Humon Smelting

How Quickly Is Shandong Humon Smelting Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Over the last three years, Shandong Humon Smelting has grown EPS by 4.9% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

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 Humon Smelting maintained stable EBIT margins over the last year, all while growing revenue 10% to CN¥73b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of Shandong Humon Smelting's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Shandong Humon Smelting Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shandong Humon Smelting followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. As a matter of fact, their holding is valued at CN¥138m. That's a lot of money, and no small incentive to work hard. Despite being just 1.0% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Shandong Humon Smelting Worth Keeping An Eye On?

One positive for Shandong Humon Smelting is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. However, before you get too excited we've discovered 3 warning signs for Shandong Humon Smelting (1 can't be ignored!) that you should be aware of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in CN with promising growth potential and insider confidence.

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.