Here's Why We Think 3onedata (SHSE:688618) Might Deserve Your Attention Today

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.

In contrast to all that, many investors prefer to focus on companies like 3onedata (SHSE:688618), which has not only revenues, but also profits. 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.

Check out our latest analysis for 3onedata

How Fast Is 3onedata Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years 3onedata grew its EPS by 14% per year. That's a pretty good rate, if the company can sustain it.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It's noted that, last year, 3onedata's revenue from operations was lower than its revenue, so that could distort our analysis of its margins. 3onedata maintained stable EBIT margins over the last year, all while growing revenue 26% to CN¥443m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. 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 3onedata's forecast profits?

Are 3onedata 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. Shareholders will be pleased by the fact that insiders own 3onedata shares worth a considerable sum. With a whopping CN¥551m worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 20% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like 3onedata with market caps between CN¥1.5b and CN¥5.8b is about CN¥849k.

3onedata's CEO took home a total compensation package worth CN¥674k in the year leading up to December 2022. That is actually below the median for CEO's of similarly sized companies. 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 3onedata Deserve A Spot On Your Watchlist?

As previously touched on, 3onedata is a growing business, which is encouraging. The fact that EPS is growing is a genuine positive for 3onedata, 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. However, before you get too excited we've discovered 1 warning sign for 3onedata that you should be aware of.

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.

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