With EPS Growth And More, Jilin Province Huinan Changlong Bio-pharmacy (HKG:8049) Makes An Interesting Case

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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Jilin Province Huinan Changlong Bio-pharmacy (HKG:8049), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Jilin Province Huinan Changlong Bio-pharmacy with the means to add long-term value to shareholders.

See our latest analysis for Jilin Province Huinan Changlong Bio-pharmacy

How Quickly Is Jilin Province Huinan Changlong Bio-pharmacy Increasing Earnings Per Share?

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. That makes EPS growth an attractive quality for any company. We can see that in the last three years Jilin Province Huinan Changlong Bio-pharmacy grew its EPS by 14% per year. That growth rate is fairly good, assuming the company can keep it up.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The good news is that Jilin Province Huinan Changlong Bio-pharmacy is growing revenues, and EBIT margins improved by 2.5 percentage points to 23%, 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. To see the actual numbers, click on the chart.

Jilin Province Huinan Changlong Bio-pharmacy isn't a huge company, given its market capitalisation of HK$824m. That makes it extra important to check on its balance sheet strength.

Are Jilin Province Huinan Changlong Bio-pharmacy Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Jilin Province Huinan Changlong Bio-pharmacy followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have CN¥285m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 35% of the company; visible skin in the game.

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 Jilin Province Huinan Changlong Bio-pharmacy with market caps under CN¥1.4b is about CN¥1.7m.

Jilin Province Huinan Changlong Bio-pharmacy's CEO took home a total compensation package of CN¥539k in the year prior to December 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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.

Is Jilin Province Huinan Changlong Bio-pharmacy Worth Keeping An Eye On?

One important encouraging feature of Jilin Province Huinan Changlong Bio-pharmacy is that it is growing profits. The fact that EPS is growing is a genuine positive for Jilin Province Huinan Changlong Bio-pharmacy, but the pleasant picture gets better than that. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. Before you take the next step you should know about the 2 warning signs for Jilin Province Huinan Changlong Bio-pharmacy (1 is potentially serious!) that we have uncovered.

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 free list of them here.

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.