If EPS Growth Is Important To You, Sunshine Guojian Pharmaceutical (Shanghai) (SHSE:688336) Presents An Opportunity

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Sunshine Guojian Pharmaceutical (Shanghai) (SHSE:688336). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Sunshine Guojian Pharmaceutical (Shanghai) with the means to add long-term value to shareholders.

Check out our latest analysis for Sunshine Guojian Pharmaceutical (Shanghai)

Sunshine Guojian Pharmaceutical (Shanghai)'s Improving Profits

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It's an outstanding feat for Sunshine Guojian Pharmaceutical (Shanghai) to have grown EPS from CN¥0.13 to CN¥0.57 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

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. Sunshine Guojian Pharmaceutical (Shanghai) shareholders can take confidence from the fact that EBIT margins are up from 0.3% to 23%, and revenue is growing. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

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 Sunshine Guojian Pharmaceutical (Shanghai)'s future profits.

Are Sunshine Guojian Pharmaceutical (Shanghai) 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. Shareholders will be pleased by the fact that insiders own Sunshine Guojian Pharmaceutical (Shanghai) shares worth a considerable sum. With a whopping CN¥568m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

Is Sunshine Guojian Pharmaceutical (Shanghai) Worth Keeping An Eye On?

Sunshine Guojian Pharmaceutical (Shanghai)'s earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Sunshine Guojian Pharmaceutical (Shanghai) for a spot on your watchlist. You still need to take note of risks, for example - Sunshine Guojian Pharmaceutical (Shanghai) has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Chinese companies which have demonstrated growth backed by significant insider holdings.

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.