If EPS Growth Is Important To You, Yili Chuanning BiotechnologyLtd (SZSE:301301) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

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 Yili Chuanning BiotechnologyLtd (SZSE:301301). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Yili Chuanning BiotechnologyLtd with the means to add long-term value to shareholders.

View our latest analysis for Yili Chuanning BiotechnologyLtd

How Fast Is Yili Chuanning BiotechnologyLtd Growing Its Earnings Per Share?

Yili Chuanning BiotechnologyLtd has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, Yili Chuanning BiotechnologyLtd's EPS shot from CN¥0.24 to CN¥0.50, over the last year. It's not often a company can achieve year-on-year growth of 107%.

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. Our analysis has highlighted that Yili Chuanning BiotechnologyLtd's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. The music to the ears of Yili Chuanning BiotechnologyLtd shareholders is that EBIT margins have grown from 19% to 27% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

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.

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 Yili Chuanning BiotechnologyLtd's future profits.

Are Yili Chuanning BiotechnologyLtd Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. Our analysis has discovered that the median total compensation for the CEOs of companies like Yili Chuanning BiotechnologyLtd with market caps between CN¥15b and CN¥47b is about CN¥1.6m.

Yili Chuanning BiotechnologyLtd offered total compensation worth CN¥1.4m to its CEO in the year to December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. 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. It can also be a sign of good governance, more generally.

Does Yili Chuanning BiotechnologyLtd Deserve A Spot On Your Watchlist?

Yili Chuanning BiotechnologyLtd's earnings have taken off in quite an impressive fashion. This appreciable increase in earnings could be a sign of an upward trajectory for the company. Meanwhile, the very reasonable CEO pay is a great reassurance, since it points to an absence of wasteful spending habits. So faced with these facts, it seems that researching this stock a little more may lead you to discover an investment opportunity that meets your quality standards. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Yili Chuanning BiotechnologyLtd (at least 1 which is significant) , and understanding these should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com