Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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.
In contrast to all that, many investors prefer to focus on companies like Dongguan Dingtong Precision Metal (SHSE:688668), 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 Dongguan Dingtong Precision Metal with the means to add long-term value to shareholders.
Check out our latest analysis for Dongguan Dingtong Precision Metal
How Fast Is Dongguan Dingtong Precision Metal Growing?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Dongguan Dingtong Precision Metal's EPS has grown 22% each year, compound, over 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. It's noted that Dongguan Dingtong Precision Metal's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Dongguan Dingtong Precision Metal remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 29% to CN¥825m. That's encouraging news for the company!
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.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Dongguan Dingtong Precision Metal?
Are Dongguan Dingtong Precision Metal Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Dongguan Dingtong Precision Metal followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. With a whopping CN¥568m worth of shares as a group, insiders have plenty riding on the company's success. At 9.7% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations between CN¥2.8b and CN¥11b, like Dongguan Dingtong Precision Metal, the median CEO pay is around CN¥854k.
Dongguan Dingtong Precision Metal's CEO took home a total compensation package worth CN¥616k in the year leading up to December 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Is Dongguan Dingtong Precision Metal Worth Keeping An Eye On?
You can't deny that Dongguan Dingtong Precision Metal has grown its earnings per share at a very impressive rate. That's attractive. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. The overarching message here is that Dongguan Dingtong Precision Metal has underlying strengths that make it worth a look at. You should always think about risks though. Case in point, we've spotted 4 warning signs for Dongguan Dingtong Precision Metal you should be aware of, and 2 of them shouldn't be ignored.
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.