Here's Why We Think Wuxi Sunlit Science and Technology (HKG:1289) 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Wuxi Sunlit Science and Technology (HKG:1289). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Wuxi Sunlit Science and Technology with the means to add long-term value to shareholders.

See our latest analysis for Wuxi Sunlit Science and Technology

Wuxi Sunlit Science and Technology's Improving Profits

Over the last three years, Wuxi Sunlit Science and Technology has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Wuxi Sunlit Science and Technology's EPS shot from CN¥0.21 to CN¥0.41, over the last year. It's not often a company can achieve year-on-year growth of 99%. The best case scenario? That the business has hit a true inflection point.

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. Wuxi Sunlit Science and Technology shareholders can take confidence from the fact that EBIT margins are up from 5.4% to 14%, and revenue is growing. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since Wuxi Sunlit Science and Technology is no giant, with a market capitalisation of HK$201m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Wuxi Sunlit Science and Technology Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Wuxi Sunlit Science and Technology insiders own a meaningful share of the business. To be exact, company insiders hold 60% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. To give you an idea, the value of insiders' holdings in the business are valued at CN¥121m at the current share price. That's nothing to sneeze at!

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Wuxi Sunlit Science and Technology, with market caps under CN¥1.4b is around CN¥1.6m.

The Wuxi Sunlit Science and Technology CEO received total compensation of just CN¥613k in the year to December 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Wuxi Sunlit Science and Technology Deserve A Spot On Your Watchlist?

Wuxi Sunlit Science and Technology's earnings per share growth have been climbing higher at an appreciable rate. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The strong EPS improvement suggests the businesses is humming along. Big growth can make big winners, so the writing on the wall tells us that Wuxi Sunlit Science and Technology is worth considering carefully. Still, you should learn about the 3 warning signs we've spotted with Wuxi Sunlit Science and Technology.

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 HK 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.