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If EPS Growth Is Important To You, China High Speed Transmission Equipment Group (HKG:658) Presents An Opportunity

Simply Wall St ·  {{timeTz}}

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing , many investors still adopt a more traditional strategy; buying shares in profitable companies like China High Speed Transmission Equipment Group (HKG:658). 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.

See our latest analysis for China High Speed Transmission Equipment Group

How Fast Is China High Speed Transmission Equipment Group Growing Its Earnings Per Share?

Over the last three years, China High Speed Transmission Equipment Group 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. Thus, it makes sense to focus on more recent growth rates, instead. To the delight of shareholders, China High Speed Transmission Equipment Group's EPS soared from CN¥0.51 to CN¥0.80, over the last year. That's a commendable gain of 56%.

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. EBIT margins for China High Speed Transmission Equipment Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 32% to CN¥20b. That's encouraging news for the company!

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.

earnings-and-revenue-historySEHK:658 Earnings and Revenue History August 11th 2022

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

Are China High Speed Transmission Equipment Group Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalisations between CN¥2.7b and CN¥11b, like China High Speed Transmission Equipment Group, the median CEO pay is around CN¥3.7m.

The China High Speed Transmission Equipment Group CEO received CN¥2.5m in compensation for the year ending December 2021. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Is China High Speed Transmission Equipment Group Worth Keeping An Eye On?

For growth investors, China High Speed Transmission Equipment Group's raw rate of earnings growth is a beacon in the night. With swiftly growing earnings, the best days may still be to come, and the modest CEO pay suggests the company is careful with cash. Based on these factors, this stock may well deserve a spot on your watchlist, or even a little further research. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with China High Speed Transmission Equipment Group , and understanding this should be part of your investment process.

Although China High Speed Transmission Equipment Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.

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