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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Zhewen Pictures Groupltd (SHSE:601599). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Zhewen Pictures Groupltd with the means to add long-term value to shareholders.
Zhewen Pictures Groupltd's Improving Profits
In the last three years Zhewen Pictures Groupltd's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Zhewen Pictures Groupltd boosted its trailing twelve month EPS from CN¥0.082 to CN¥0.097, in the last year. There's little doubt shareholders would be happy with that 19% gain.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that Zhewen Pictures Groupltd's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The good news is that Zhewen Pictures Groupltd is growing revenues, and EBIT margins improved by 6.1 percentage points to -0.1%, over the last year. Both of which are great metrics to check off for potential growth.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
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 Zhewen Pictures Groupltd's balance sheet strength, before getting too excited.
Are Zhewen Pictures Groupltd 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. Zhewen Pictures Groupltd followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they have a considerable amount of wealth invested in it, currently valued at CN¥773m. This totals to 15% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Looking very optimistic for investors.
Does Zhewen Pictures Groupltd Deserve A Spot On Your Watchlist?
As previously touched on, Zhewen Pictures Groupltd is a growing business, which is encouraging. To add an extra spark to the fire, significant insider ownership in the company is another highlight. These two factors are a huge highlight for the company which should be a strong contender your watchlists. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Zhewen Pictures Groupltd (1 can't be ignored) you should be aware of.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in CN with promising growth potential and insider confidence.
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.