Here's Why We Think Weihai Guangwei Composites (SZSE:300699) Might Deserve Your Attention Today

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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. 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.

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 Weihai Guangwei Composites (SZSE:300699). 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 Weihai Guangwei Composites

Weihai Guangwei Composites' 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Weihai Guangwei Composites has grown EPS by 5.7% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

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. While we note Weihai Guangwei Composites achieved similar EBIT margins to last year, revenue grew by a solid 15% to CN¥2.7b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Weihai Guangwei Composites?

Are Weihai Guangwei Composites 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. So it is good to see that Weihai Guangwei Composites insiders have a significant amount of capital invested in the stock. Holding CN¥647m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This should keep them focused on creating long term value for shareholders.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are 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 Weihai Guangwei Composites with market caps between CN¥15b and CN¥47b is about CN¥1.5m.

The CEO of Weihai Guangwei Composites only received CN¥740k in total compensation for the year ending December 2023. First impressions seem to indicate a compensation policy that is favourable to 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Weihai Guangwei Composites To Your Watchlist?

As previously touched on, Weihai Guangwei Composites is a growing business, which is encouraging. The fact that EPS is growing is a genuine positive for Weihai Guangwei Composites, but the pleasant picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. Still, you should learn about the 2 warning signs we've spotted with Weihai Guangwei Composites (including 1 which 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.