Does Consun Pharmaceutical Group (HKG:1681) Deserve A Spot On Your Watchlist?

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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Consun Pharmaceutical Group (HKG:1681), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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How Fast Is Consun Pharmaceutical Group Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Consun Pharmaceutical Group has grown EPS by 14% per year. That's a good rate of growth, if it can be sustained.

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. EBIT margins for Consun Pharmaceutical Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 19% to CN¥3.3b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

View our latest analysis for Consun Pharmaceutical Group

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 Consun Pharmaceutical Group.

Are Consun Pharmaceutical Group Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

First and foremost; there we saw no insiders sell Consun Pharmaceutical Group shares in the last year. Even better, though, is that the CEO & Executive Chairman, Meng An, bought a whopping CN¥5.3m worth of shares, paying about CN¥11.48 per share, on average. It seems at least one insider thinks that the company is doing well - and they are backing that view with cash.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Consun Pharmaceutical Group will reveal that insiders own a significant piece of the pie. Owning 40% of the company, insiders have plenty riding on the performance of the the share price. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. At the current share price, that insider holding is worth a staggering CN¥5.1b. That means they have plenty of their own capital riding on the performance of the business!

Does Consun Pharmaceutical Group Deserve A Spot On Your Watchlist?

One important encouraging feature of Consun Pharmaceutical Group is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. You still need to take note of risks, for example - Consun Pharmaceutical Group has 1 warning sign we think you should be aware of.

The good news is that Consun Pharmaceutical Group is not the only stock with insider buying. Here's a list of small cap, undervalued companies in HK with insider buying in the last three months!

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.