Here's Why I Think Charoen Pokphand Enterprise(Taiwan) (TPE:1215) Is An Interesting Stock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Charoen Pokphand Enterprise(Taiwan) (TPE:1215). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Charoen Pokphand Enterprise(Taiwan)

How Quickly Is Charoen Pokphand Enterprise(Taiwan) Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. Over the last three years, Charoen Pokphand Enterprise(Taiwan) has grown EPS by 6.5% per year. While that sort of growth rate isn't amazing, it does show the business is growing.

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. Charoen Pokphand Enterprise(Taiwan) maintained stable EBIT margins over the last year, all while growing revenue 6.6% to NT$22b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Charoen Pokphand Enterprise(Taiwan) Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Charoen Pokphand Enterprise(Taiwan) insiders have a significant amount of capital invested in the stock. To be specific, they have NT$609m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 3.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Charoen Pokphand Enterprise(Taiwan) Worth Keeping An Eye On?

One important encouraging feature of Charoen Pokphand Enterprise(Taiwan) is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Charoen Pokphand Enterprise(Taiwan) (at least 1 which can't be ignored) , and understanding these should be part of your investment process.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like 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. 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.
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