With EPS Growth And More, Lizhong Sitong Light Alloys Group (SZSE:300428) Makes An Interesting Case

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Lizhong Sitong Light Alloys Group (SZSE:300428). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Lizhong Sitong Light Alloys Group with the means to add long-term value to shareholders.

Check out our latest analysis for Lizhong Sitong Light Alloys Group

Lizhong Sitong Light Alloys Group's Earnings Per Share Are 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. We can see that in the last three years Lizhong Sitong Light Alloys Group grew its EPS by 8.5% per year. That's a pretty good rate, if the company can sustain it.

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. Lizhong Sitong Light Alloys Group maintained stable EBIT margins over the last year, all while growing revenue 13% to CN¥25b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Lizhong Sitong Light Alloys Group's future profits.

Are Lizhong Sitong Light Alloys Group Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Lizhong Sitong Light Alloys Group shares worth a considerable sum. We note that their impressive stake in the company is worth CN¥1.5b. That equates to 13% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations between CN¥7.1b and CN¥23b, like Lizhong Sitong Light Alloys Group, the median CEO pay is around CN¥1.3m.

Lizhong Sitong Light Alloys Group's CEO only received compensation totalling CN¥359k in the year to December 2023. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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.

Does Lizhong Sitong Light Alloys Group Deserve A Spot On Your Watchlist?

As previously touched on, Lizhong Sitong Light Alloys Group is a growing business, which is encouraging. The growth of EPS may be the eye-catching headline for Lizhong Sitong Light Alloys Group, but there's more to bring joy for shareholders. 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. You should always think about risks though. Case in point, we've spotted 2 warning signs for Lizhong Sitong Light Alloys Group you should be aware of, and 1 of them makes us a bit uncomfortable.

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.