If EPS Growth Is Important To You, Zhejiang Chang'an Renheng Technology (HKG:8139) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Zhejiang Chang'an Renheng Technology (HKG:8139). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Zhejiang Chang'an Renheng Technology

Zhejiang Chang'an Renheng Technology's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Zhejiang Chang'an Renheng Technology's EPS has grown 25% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. While we note Zhejiang Chang'an Renheng Technology achieved similar EBIT margins to last year, revenue grew by a solid 7.6% to CN¥162m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Zhejiang Chang'an Renheng Technology isn't a huge company, given its market capitalisation of HK$43m. That makes it extra important to check on its balance sheet strength.

Are Zhejiang Chang'an Renheng Technology Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Zhejiang Chang'an Renheng Technology insiders own a significant number of shares certainly is appealing. In fact, they own 61% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Although, with Zhejiang Chang'an Renheng Technology being valued at HK$43m, this is a small company we're talking about. So this large proportion of shares owned by insiders only amounts to CN¥26m. That might not be a huge sum but it should be enough to keep insiders motivated!

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Zhejiang Chang'an Renheng Technology with market caps under CN¥1.5b is about CN¥1.7m.

The CEO of Zhejiang Chang'an Renheng Technology was paid just CN¥363k in total compensation for the year ending December 2023. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Zhejiang Chang'an Renheng Technology Deserve A Spot On Your Watchlist?

You can't deny that Zhejiang Chang'an Renheng Technology has grown its earnings per share at a very impressive rate. That's attractive. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. This may only be a fast rundown, but the key takeaway is that Zhejiang Chang'an Renheng Technology is worth keeping an eye on. Even so, be aware that Zhejiang Chang'an Renheng Technology is showing 4 warning signs in our investment analysis , and 2 of those shouldn't be ignored...

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Hong Kong companies which have demonstrated growth backed by significant insider holdings.

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.

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