With EPS Growth And More, Chongqing Chuanyi Automation (SHSE:603100) Makes An Interesting Case

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.

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 Chongqing Chuanyi Automation (SHSE:603100). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Chongqing Chuanyi Automation

How Quickly Is Chongqing Chuanyi Automation 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Chongqing Chuanyi Automation managed to grow EPS by 9.3% per year, over three years. That's a pretty good rate, if the company can sustain it.

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. While we note Chongqing Chuanyi Automation achieved similar EBIT margins to last year, revenue grew by a solid 4.8% to CN¥7.5b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Chongqing Chuanyi Automation's forecast profits?

Are Chongqing Chuanyi Automation Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. The median total compensation for CEOs of companies similar in size to Chongqing Chuanyi Automation, with market caps between CN¥7.3b and CN¥23b, is around CN¥1.2m.

The Chongqing Chuanyi Automation CEO received total compensation of just CN¥506k in the year to December 2023. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. 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 Chongqing Chuanyi Automation To Your Watchlist?

One important encouraging feature of Chongqing Chuanyi Automation is that it is growing profits. Not only that, but the CEO is paid quite reasonably, which should prompt investors to feel more trusting of the board of directors. So based on its merits, the stock deserves further research, if not an addition to your watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for Chongqing Chuanyi Automation you should be aware of.

Although Chongqing Chuanyi Automation certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Chinese companies that not only boast of strong growth but have strong insider backing.

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.