Does Shenzhen RongDa Photosensitive Science & Technology (SZSE:300576) Deserve A Spot On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Shenzhen RongDa Photosensitive Science & Technology (SZSE:300576). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shenzhen RongDa Photosensitive Science & Technology with the means to add long-term value to shareholders.

View our latest analysis for Shenzhen RongDa Photosensitive Science & Technology

Shenzhen RongDa Photosensitive Science & Technology's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, Shenzhen RongDa Photosensitive Science & Technology has grown EPS by 13% per year. That growth rate is fairly good, assuming the company can keep it up.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The music to the ears of Shenzhen RongDa Photosensitive Science & Technology shareholders is that EBIT margins have grown from 8.2% to 16% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

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.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Shenzhen RongDa Photosensitive Science & Technology's balance sheet strength, before getting too excited.

Are Shenzhen RongDa Photosensitive Science & Technology Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So those who are interested in Shenzhen RongDa Photosensitive Science & Technology will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. In fact, they own 52% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. At the current share price, that insider holding is worth a staggering CN¥4.9b. That means they have plenty of their own capital riding on the performance of the business!

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. The median total compensation for CEOs of companies similar in size to Shenzhen RongDa Photosensitive Science & Technology, with market caps between CN¥7.1b and CN¥23b, is around CN¥1.4m.

The Shenzhen RongDa Photosensitive Science & Technology CEO received CN¥876k in compensation for the year ending December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Is Shenzhen RongDa Photosensitive Science & Technology Worth Keeping An Eye On?

One important encouraging feature of Shenzhen RongDa Photosensitive Science & Technology is that it is growing profits. The growth of EPS may be the eye-catching headline for Shenzhen RongDa Photosensitive Science & Technology, 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. We don't want to rain on the parade too much, but we did also find 2 warning signs for Shenzhen RongDa Photosensitive Science & Technology (1 is potentially serious!) that you need to be mindful 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.