If EPS Growth Is Important To You, Wuhan P&S Information Technology (SZSE:300184) 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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Wuhan P&S Information Technology (SZSE:300184). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Wuhan P&S Information Technology with the means to add long-term value to shareholders.

See our latest analysis for Wuhan P&S Information Technology

Wuhan P&S Information Technology's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Wuhan P&S Information Technology's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 53%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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 Wuhan P&S Information Technology achieved similar EBIT margins to last year, revenue grew by a solid 19% to CN¥7.2b. That's progress.

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 Wuhan P&S Information Technology's balance sheet strength, before getting too excited.

Are Wuhan P&S Information Technology Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Wuhan P&S Information Technology insiders have a significant amount of capital invested in the stock. We note that their impressive stake in the company is worth CN¥1.8b. This totals to 13% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Looking very optimistic for investors.

Does Wuhan P&S Information Technology Deserve A Spot On Your Watchlist?

Wuhan P&S Information Technology's earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Wuhan P&S Information Technology for a spot on your watchlist. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Wuhan P&S Information Technology 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.