Stock Analysis

Shandong Weigao Group Medical Polymer (HKG:1066) Ticks All The Boxes When It Comes To Earnings Growth

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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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Shandong Weigao Group Medical Polymer (HKG:1066). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shandong Weigao Group Medical Polymer with the means to add long-term value to shareholders.

Check out our latest analysis for Shandong Weigao Group Medical Polymer

How Quickly Is Shandong Weigao Group Medical Polymer Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. We can see that in the last three years Shandong Weigao Group Medical Polymer grew its EPS by 12% per year. That's a good rate of growth, if it can be sustained.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Shandong Weigao Group Medical Polymer maintained stable EBIT margins over the last year, all while growing revenue 10.0% to CN¥14b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

SEHK:1066 Earnings and Revenue History March 17th 2023

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Shandong Weigao Group Medical Polymer's forecast profits?

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

Since Shandong Weigao Group Medical Polymer has a market capitalisation of HK$54b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. To be specific, they have CN¥138m worth of shares. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.3%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations between CN¥28b and CN¥83b, like Shandong Weigao Group Medical Polymer, the median CEO pay is around CN¥5.8m.

Shandong Weigao Group Medical Polymer offered total compensation worth CN¥3.2m to its CEO in the year to December 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

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

As previously touched on, Shandong Weigao Group Medical Polymer is a growing business, which is encouraging. Earnings growth might be the main attraction for Shandong Weigao Group Medical Polymer, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Shandong Weigao Group Medical Polymer.

Although Shandong Weigao Group Medical Polymer certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.

Valuation is complex, but we're helping make it simple.

Find out whether Shandong Weigao Group Medical Polymer is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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