Is Now The Time To Put WuXi XDC Cayman (HKG:2268) On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 WuXi XDC Cayman (HKG:2268). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

How Fast Is WuXi XDC Cayman Growing Its Earnings Per Share?

WuXi XDC Cayman has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, WuXi XDC Cayman's EPS shot from CN¥0.53 to CN¥1.06, over the last year. It's a rarity to see 100% year-on-year growth like that. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that WuXi XDC Cayman is growing revenues, and EBIT margins improved by 4.9 percentage points to 25%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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.

See our latest analysis for WuXi XDC Cayman

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of WuXi XDC Cayman's forecast profits?

Are WuXi XDC Cayman Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a HK$85b company like WuXi XDC Cayman. But we do take comfort from the fact that they are investors in the company. As a matter of fact, their holding is valued at CN¥97m. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.1%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Should You Add WuXi XDC Cayman To Your Watchlist?

WuXi XDC Cayman's earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching WuXi XDC Cayman very closely. Still, you should learn about the 2 warning signs we've spotted with WuXi XDC Cayman (including 1 which shouldn't be ignored).

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in HK with promising growth potential and insider confidence.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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

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.