Does Shandong Weigao Group Medical Polymer (HKG:1066) Deserve A Spot On Your Watchlist?

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 completely lacks a track record of revenue and profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Shandong Weigao Group Medical Polymer (HKG:1066). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Shandong Weigao Group Medical Polymer

How Fast Is Shandong Weigao Group Medical Polymer Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. As a tree reaches steadily for the sky, Shandong Weigao Group Medical Polymer's EPS has grown 21% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Shandong Weigao Group Medical Polymer maintained stable EBIT margins over the last year, all while growing revenue 16% to CN¥12b. That's a real positive.

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.

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Shandong Weigao Group Medical Polymer?

Are Shandong Weigao Group Medical Polymer Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a HK$46b company like Shandong Weigao Group Medical Polymer. But we are reassured by the fact they have invested in the company. With a whopping CN¥521m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

Should You Add Shandong Weigao Group Medical Polymer To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Shandong Weigao Group Medical Polymer's strong EPS growth. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. You still need to take note of risks, for example - Shandong Weigao Group Medical Polymer has 1 warning sign we think you should be aware of.

Although Shandong Weigao Group Medical Polymer certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.