Astro-century Education&TechnologyLtd (SZSE:300654) Ticks All The Boxes When It Comes To Earnings Growth

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Astro-century Education&TechnologyLtd (SZSE:300654). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Astro-century Education&TechnologyLtd

How Quickly Is Astro-century Education&TechnologyLtd Increasing Earnings Per Share?

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, Astro-century Education&TechnologyLtd has grown EPS by 6.9% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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 Astro-century Education&TechnologyLtd achieved similar EBIT margins to last year, revenue grew by a solid 4.7% to CN¥527m. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. 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 Astro-century Education&TechnologyLtd's balance sheet strength, before getting too excited.

Are Astro-century Education&TechnologyLtd Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Astro-century Education&TechnologyLtd followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. With a whopping CN¥445m worth of shares as a group, insiders have plenty riding on the company's success. Amounting to 9.2% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations between CN¥2.9b and CN¥12b, like Astro-century Education&TechnologyLtd, the median CEO pay is around CN¥969k.

The Astro-century Education&TechnologyLtd CEO received total compensation of only CN¥304k in the year to December 2023. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Astro-century Education&TechnologyLtd To Your Watchlist?

As previously touched on, Astro-century Education&TechnologyLtd is a growing business, which is encouraging. The growth of EPS may be the eye-catching headline for Astro-century Education&TechnologyLtd, 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. It is worth noting though that we have found 1 warning sign for Astro-century Education&TechnologyLtd that you need to take into consideration.

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.