Here's Why I Think China Daye Non-Ferrous Metals Mining (HKG:661) Is An Interesting Stock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in China Daye Non-Ferrous Metals Mining (HKG:661). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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

How Fast Is China Daye Non-Ferrous Metals Mining Growing Its Earnings Per Share?

Over the last three years, China Daye Non-Ferrous Metals Mining has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, China Daye Non-Ferrous Metals Mining's EPS shot from CN¥0.0082 to CN¥0.017, over the last year. You don't see 109% year-on-year growth like that, very often.

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). While China Daye Non-Ferrous Metals Mining may have maintained EBIT margins over the last year, revenue has fallen. And that does make me a little more cautious of the stock.

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.

Since China Daye Non-Ferrous Metals Mining is no giant, with a market capitalization of HK$2.1b, 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¥655m and CN¥2.6b, like China Daye Non-Ferrous Metals Mining, the median CEO pay is around CN¥2.0m.

The China Daye Non-Ferrous Metals Mining CEO received CN¥1.3m in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, 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.

Is China Daye Non-Ferrous Metals Mining Worth Keeping An Eye On?

China Daye Non-Ferrous Metals Mining's earnings have taken off like any random crypto-currency did, back in 2017. 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. Before you take the next step you should know about the 2 warning signs for China Daye Non-Ferrous Metals Mining (1 doesn't sit too well with us!) that we have uncovered.

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. 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.
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