With EPS Growth And More, Shanghai Fudan Microelectronics Group (HKG:1385) Is Interesting

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like Shanghai Fudan Microelectronics Group (HKG:1385). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Shanghai Fudan Microelectronics Group

How Fast Is Shanghai Fudan Microelectronics Group Growing Its Earnings Per Share?

Over the last three years, Shanghai Fudan Microelectronics Group has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, Shanghai Fudan Microelectronics Group's EPS shot from CN¥0.27 to CN¥0.81, over the last year. You don't see 200% year-on-year growth like that, very often. That could be a sign that the business has reached a true inflection point.

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. The good news is that Shanghai Fudan Microelectronics Group is growing revenues, and EBIT margins improved by 18.8 percentage points to 25%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Shanghai Fudan Microelectronics Group's balance sheet strength, before getting too excited.

Are Shanghai Fudan Microelectronics Group Insiders Aligned With All Shareholders?

Since Shanghai Fudan Microelectronics Group has a market capitalization of HK$40b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Indeed, they have a glittering mountain of wealth invested in it, currently valued at CN¥1.1b. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Is Shanghai Fudan Microelectronics Group Worth Keeping An Eye On?

Shanghai Fudan Microelectronics Group's earnings per share have taken off like a rocket aimed right at the moon. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Shanghai Fudan Microelectronics Group for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Shanghai Fudan Microelectronics Group you should be aware of.

Although Shanghai Fudan Microelectronics Group certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.