Here's Why Guangzhou Baiyunshan Pharmaceutical Holdings (HKG:874) Has Caught The Eye Of Investors

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 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Guangzhou Baiyunshan Pharmaceutical Holdings (HKG:874). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Guangzhou Baiyunshan Pharmaceutical Holdings

Guangzhou Baiyunshan Pharmaceutical Holdings' Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Guangzhou Baiyunshan Pharmaceutical Holdings grew its EPS by 11% per year. That's a pretty good rate, if the company can sustain it.

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. Guangzhou Baiyunshan Pharmaceutical Holdings maintained stable EBIT margins over the last year, all while growing revenue 3.4% to CN¥72b. 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.

Fortunately, we've got access to analyst forecasts of Guangzhou Baiyunshan Pharmaceutical Holdings' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Guangzhou Baiyunshan Pharmaceutical Holdings 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. For companies with market capitalisations between CN¥28b and CN¥83b, like Guangzhou Baiyunshan Pharmaceutical Holdings, the median CEO pay is around CN¥6.1m.

The Guangzhou Baiyunshan Pharmaceutical Holdings CEO received total compensation of just CN¥1.7m in the year to December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. 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. It can also be a sign of good governance, more generally.

Is Guangzhou Baiyunshan Pharmaceutical Holdings Worth Keeping An Eye On?

As previously touched on, Guangzhou Baiyunshan Pharmaceutical Holdings is a growing business, which is encouraging. Not only that, but the CEO is paid quite reasonably, which should prompt investors to feel more trusting of the board of directors. So all in all Guangzhou Baiyunshan Pharmaceutical Holdings is worthy at least considering for your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Guangzhou Baiyunshan Pharmaceutical Holdings (at least 1 which is concerning) , and understanding these should be part of your investment process.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.