Here's Why We Think Zhongsheng Group Holdings (HKG:881) Might Deserve Your Attention Today

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. 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. 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.

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 Zhongsheng Group Holdings (HKG:881). 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.

Check out our latest analysis for Zhongsheng Group Holdings

Zhongsheng Group Holdings' Earnings Per Share Are Growing

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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Zhongsheng Group Holdings has grown EPS by 29% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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 Zhongsheng Group Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 18% to CN¥175b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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 Zhongsheng Group Holdings.

Are Zhongsheng Group Holdings Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

First things first, there weren't any reports of insiders selling shares in Zhongsheng Group Holdings in the last 12 months. Even better, though, is that the Independent Non-Executive Director, Yanwei Li, bought a whopping CN¥2.4m worth of shares, paying about CN¥59.58 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 Zhongsheng Group Holdings will reveal that insiders own a significant piece of the pie. In fact, they own 47% 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. And their holding is extremely valuable at the current share price, totalling CN¥62b. This is an incredible endorsement from them.

Is Zhongsheng Group Holdings Worth Keeping An Eye On?

You can't deny that Zhongsheng Group Holdings has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. So it's fair to say that this stock may well deserve a spot on your watchlist. You still need to take note of risks, for example - Zhongsheng Group Holdings has 1 warning sign we think you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Zhongsheng Group Holdings isn't the only one. You can see a 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.