With EPS Growth And More, Guangzhou Baiyunshan Pharmaceutical Holdings (HKG:874) Makes An Interesting Case

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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable 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.

View our latest analysis for Guangzhou Baiyunshan Pharmaceutical Holdings

Guangzhou Baiyunshan Pharmaceutical Holdings' Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. 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 17% 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. While we note Guangzhou Baiyunshan Pharmaceutical Holdings achieved similar EBIT margins to last year, revenue grew by a solid 5.5% to CN¥74b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Guangzhou Baiyunshan Pharmaceutical Holdings.

Are Guangzhou Baiyunshan Pharmaceutical Holdings Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. Our analysis has discovered that the median total compensation for the CEOs of companies like Guangzhou Baiyunshan Pharmaceutical Holdings with market caps between CN¥29b and CN¥86b is about CN¥6.3m.

The CEO of Guangzhou Baiyunshan Pharmaceutical Holdings only received CN¥1.5m in total compensation for the year ending December 2022. First impressions seem to indicate a compensation policy that is favourable to shareholders. 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 a culture of integrity, in a broader sense.

Should You Add Guangzhou Baiyunshan Pharmaceutical Holdings To Your Watchlist?

As previously touched on, Guangzhou Baiyunshan Pharmaceutical Holdings is a growing business, which is encouraging. To add to this, the modest CEO compensation should tell investors that the directors have an active interest in delivering the best for shareholders. So all in all Guangzhou Baiyunshan Pharmaceutical Holdings is worthy at least considering for your watchlist. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Guangzhou Baiyunshan Pharmaceutical Holdings that you should be aware of.

Although Guangzhou Baiyunshan Pharmaceutical Holdings 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.

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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.