Do Tong Ren Tang Technologies' (HKG:1666) Earnings Warrant Your Attention?

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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Tong Ren Tang Technologies (HKG:1666). 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 Tong Ren Tang Technologies

Tong Ren Tang Technologies' 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. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Tong Ren Tang Technologies has grown EPS by 12% per year. That growth rate is fairly good, assuming the company can keep it up.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Tong Ren Tang Technologies remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 11% to CN¥6.0b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

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

Are Tong Ren Tang Technologies Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Tong Ren Tang Technologies shares worth a considerable sum. To be specific, they have CN¥268m worth of shares. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 2.8%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

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. The median total compensation for CEOs of companies similar in size to Tong Ren Tang Technologies, with market caps between CN¥6.9b and CN¥22b, is around CN¥3.8m.

Tong Ren Tang Technologies offered total compensation worth CN¥2.0m to its CEO in the year to December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. 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 a culture of integrity, in a broader sense.

Is Tong Ren Tang Technologies Worth Keeping An Eye On?

One important encouraging feature of Tong Ren Tang Technologies is that it is growing profits. Earnings growth might be the main attraction for Tong Ren Tang Technologies, but the fun does not stop there. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. Now, you could try to make up your mind on Tong Ren Tang Technologies by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although Tong Ren Tang Technologies 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.