Do China Daye Non-Ferrous Metals Mining's (HKG:661) Earnings Warrant Your Attention?

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.

So if you're like me, you might be more interested in profitable, growing companies, like China Daye Non-Ferrous Metals Mining (HKG:661). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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.

Check out our latest analysis for China Daye Non-Ferrous Metals Mining

China Daye Non-Ferrous Metals Mining's Improving Profits

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that China Daye Non-Ferrous Metals Mining's EPS went from CN¥0.0074 to CN¥0.025 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note China Daye Non-Ferrous Metals Mining's EBIT margins were flat over the last year, revenue grew by a solid 24% to CN¥34b. 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.

Since China Daye Non-Ferrous Metals Mining is no giant, with a market capitalization of HK$1.6b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are China Daye Non-Ferrous Metals Mining Insiders Aligned With All Shareholders?

I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. For companies with market capitalizations between CN¥636m and CN¥2.5b, like China Daye Non-Ferrous Metals Mining, the median CEO pay is around CN¥1.8m.

The China Daye Non-Ferrous Metals Mining CEO received CN¥1.2m in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. 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 China Daye Non-Ferrous Metals Mining Deserve A Spot On Your Watchlist?

China Daye Non-Ferrous Metals Mining's earnings per share have taken off like a rocket aimed right at the moon. With rocketing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. Meanwhile, the very reasonable CEO pay reassures me a little, since it points to an absence profligacy. While I couldn't be sure without a deeper dive, it does seem that China Daye Non-Ferrous Metals Mining has the hallmarks of a quality business; and that would make it well worth watching. You still need to take note of risks, for example - China Daye Non-Ferrous Metals Mining has 1 warning sign we think you should be aware of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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.