Here's Why We Think Guangzhou Hangxin Aviation Technology (SZSE:300424) Might Deserve Your Attention Today

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.

In contrast to all that, many investors prefer to focus on companies like Guangzhou Hangxin Aviation Technology (SZSE:300424), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Guangzhou Hangxin Aviation Technology

Guangzhou Hangxin Aviation Technology's Improving Profits

In the last three years Guangzhou Hangxin Aviation Technology's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, Guangzhou Hangxin Aviation Technology's EPS catapulted from CN¥0.092 to CN¥0.15, over the last year. Year on year growth of 67% is certainly a sight to behold.

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. Despite consistency in EBIT margins year on year, Guangzhou Hangxin Aviation Technology has actually recorded a dip in revenue. This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.

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.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Guangzhou Hangxin Aviation Technology 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. So it is good to see that Guangzhou Hangxin Aviation Technology insiders have a significant amount of capital invested in the stock. Given insiders own a significant chunk of shares, currently valued at CN¥361m, they have plenty of motivation to push the business to succeed. Amounting to 12% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.

Should You Add Guangzhou Hangxin Aviation Technology To Your Watchlist?

Guangzhou Hangxin Aviation Technology's earnings per share growth have been climbing higher at an appreciable rate. 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 Guangzhou Hangxin Aviation Technology for a spot on your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Guangzhou Hangxin Aviation Technology (1 doesn't sit too well with us) you should be aware of.

Although Guangzhou Hangxin Aviation Technology 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.