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.

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 Hebei Hengshui Laobaigan Liquor (SHSE:600559). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Hebei Hengshui Laobaigan Liquor with the means to add long-term value to shareholders.

How Fast Is Hebei Hengshui Laobaigan Liquor Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Hebei Hengshui Laobaigan Liquor has grown EPS by 31% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. The good news is that Hebei Hengshui Laobaigan Liquor is growing revenues, and EBIT margins improved by 7.7 percentage points to 16%, over the last year. That's great to see, on both counts.

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.

Fortunately, we've got access to analyst forecasts of Hebei Hengshui Laobaigan Liquor's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Hebei Hengshui Laobaigan Liquor Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. The median total compensation for CEOs of companies similar in size to Hebei Hengshui Laobaigan Liquor, with market caps between CN¥14b and CN¥46b, is around CN¥1.6m.

Hebei Hengshui Laobaigan Liquor's CEO took home a total compensation package of CN¥600k in the year prior to December 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Hebei Hengshui Laobaigan Liquor To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Hebei Hengshui Laobaigan Liquor's strong EPS growth. With swiftly growing earnings, the best days may still be to come, and the modest CEO pay suggests the company is careful with cash. We think that based on its merits alone, this stock is worth watching into the future. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Hebei Hengshui Laobaigan Liquor , and understanding it should be part of your investment process.

Although Hebei Hengshui Laobaigan Liquor certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Chinese companies that not only boast of strong growth but have also seen recent insider buying..

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.