With EPS Growth And More, Grand Pharmaceutical Group (HKG:512) Makes An Interesting Case

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 Grand Pharmaceutical Group (HKG:512). 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.

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Grand Pharmaceutical Group's Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Grand Pharmaceutical Group's EPS skyrocketed from HK$0.54 to HK$0.70, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 32%.

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. While Grand Pharmaceutical Group did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

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.

Check out our latest analysis for Grand Pharmaceutical Group

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Grand Pharmaceutical Group's future profits.

Are Grand Pharmaceutical Group Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Shareholders in Grand Pharmaceutical Group will be more than happy to see insiders committing themselves to the company, spending HK$1.7m on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. It is also worth noting that it was Executive Chairman Weikun Tang who made the biggest single purchase, worth HK$448k, paying HK$8.96 per share.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Grand Pharmaceutical Group will reveal that insiders own a significant piece of the pie. In fact, they own 49% of the shares, making insiders a very influential shareholder group. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. HK$17b That means they have plenty of their own capital riding on the performance of the business!

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Chao Zhou is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Grand Pharmaceutical Group with market caps between HK$16b and HK$50b is about HK$4.2m.

Grand Pharmaceutical Group offered total compensation worth HK$2.5m to its CEO in the year to December 2024. 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.

Does Grand Pharmaceutical Group Deserve A Spot On Your Watchlist?

For growth investors, Grand Pharmaceutical Group's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. We should say that we've discovered 1 warning sign for Grand Pharmaceutical Group that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Grand Pharmaceutical Group, you'll probably love this curated collection of companies in HK that have an attractive valuation alongside 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.