Here's Why Guizhou Chanhen Chemical (SZSE:002895) Has Caught The Eye Of Investors

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. 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Guizhou Chanhen Chemical (SZSE:002895). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Guizhou Chanhen Chemical

How Fast Is Guizhou Chanhen Chemical Growing Its Earnings Per Share?

Over the last three years, Guizhou Chanhen Chemical has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Guizhou Chanhen Chemical's EPS has risen over the last 12 months, growing from CN¥1.33 to CN¥1.57. This amounts to a 18% gain; a figure that shareholders will be pleased to see.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of Guizhou Chanhen Chemical's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Guizhou Chanhen Chemical remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 32% to CN¥4.9b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Guizhou Chanhen Chemical's forecast profits?

Are Guizhou Chanhen Chemical Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalisations between CN¥7.1b and CN¥23b, like Guizhou Chanhen Chemical, the median CEO pay is around CN¥1.2m.

The Guizhou Chanhen Chemical CEO received CN¥684k in compensation for the year ending December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. 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.

Does Guizhou Chanhen Chemical Deserve A Spot On Your Watchlist?

As previously touched on, Guizhou Chanhen Chemical is a growing business, which is encouraging. Not only that, but the CEO is paid quite reasonably, which should prompt investors to feel more trusting of the board of directors. So all in all Guizhou Chanhen Chemical is worthy at least considering for your watchlist. Still, you should learn about the 2 warning signs we've spotted with Guizhou Chanhen Chemical.

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.