Here's Why We Think Shanshan Brand Management (HKG:1749) Is Well Worth Watching

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Shanshan Brand Management (HKG:1749). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Shanshan Brand Management

How Fast Is Shanshan Brand Management Growing Its Earnings Per Share?

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. It is awe-striking that Shanshan Brand Management's EPS went from CN¥0.038 to CN¥0.20 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.

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. Shanshan Brand Management shareholders can take confidence from the fact that EBIT margins are up from 1.2% to 3.6%, 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. Click on the chart to see the exact numbers.

Since Shanshan Brand Management is no giant, with a market capitalisation of HK$80m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Shanshan Brand Management Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. Our analysis has discovered that the median total compensation for the CEOs of companies like Shanshan Brand Management with market caps under CN¥1.4b is about CN¥1.7m.

The Shanshan Brand Management CEO received total compensation of just CN¥637k in the year to December 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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 Shanshan Brand Management Deserve A Spot On Your Watchlist?

Shanshan Brand Management's earnings per share growth have been climbing higher at an appreciable rate. This appreciable increase in earnings could be a sign of an upward trajectory for the company. Meanwhile, the very reasonable CEO pay is a great reassurance, since it points to an absence of wasteful spending habits. It will definitely require further research to be sure, but it does seem that Shanshan Brand Management has the hallmarks of a quality business; and that would make it well worth watching. However, before you get too excited we've discovered 4 warning signs for Shanshan Brand Management (1 is potentially serious!) that you should be aware of.

Although Shanshan Brand Management certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Hong Kong companies that not only boast of strong growth but have also seen recent insider buying..

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.