The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Anhui Anfu Battery TechnologyLtd (SHSE:603031). 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.
How Fast Is Anhui Anfu Battery TechnologyLtd Growing Its Earnings Per Share?
Over the last three years, Anhui Anfu Battery TechnologyLtd has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Impressively, Anhui Anfu Battery TechnologyLtd's EPS catapulted from CN¥0.40 to CN¥0.72, over the last year. It's a rarity to see 82% year-on-year growth like that. Shareholders will be hopeful that this is a sign of the company reaching an 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 music to the ears of Anhui Anfu Battery TechnologyLtd shareholders is that EBIT margins have grown from 16% to 21% in the last 12 months and revenues are on an upwards trend as well. 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 Anhui Anfu Battery TechnologyLtd's balance sheet strength, before getting too excited.
Are Anhui Anfu Battery TechnologyLtd 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. So it is good to see that Anhui Anfu Battery TechnologyLtd insiders have a significant amount of capital invested in the stock. Notably, they have an enviable stake in the company, worth CN¥1.2b. Coming in at 18% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.
Is Anhui Anfu Battery TechnologyLtd Worth Keeping An Eye On?
Anhui Anfu Battery TechnologyLtd's earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Anhui Anfu Battery TechnologyLtd very closely. Before you take the next step you should know about the 2 warning signs for Anhui Anfu Battery TechnologyLtd 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 tailored list of Chinese companies which have demonstrated growth backed by recent insider purchases.
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.