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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'  While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Xin Yuan Enterprises Group (HKG:1748). 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 Xin Yuan Enterprises Group

How Fast Is Xin Yuan Enterprises Group 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.   Xin Yuan Enterprises Group managed to grow EPS by 12% per year, over three years.   That growth rate is fairly good, assuming the company can keep it up.  

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.    This approach makes Xin Yuan Enterprises Group look pretty good, on balance; although revenue is flattish, EBIT margins improved from 13% to 21% in the last year.  Which is a great look for the company.  

In the chart below, you can see how the company has grown earnings and revenue, over time.  To see the actual numbers, click on the chart.

SEHK:1748 Earnings and Revenue History November 16th 2023

Since Xin Yuan Enterprises Group is no giant, with a market capitalisation of HK$1.1b, you should definitely check its cash and debt before getting too excited about its prospects.  

Are Xin Yuan Enterprises Group Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price.  So those who are interested in Xin Yuan Enterprises Group will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares.    In fact, they own 73% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders.  This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders.    In terms of absolute value, insiders have US$805m invested in the business, at the current share price.  That's nothing to sneeze at!  

Is Xin Yuan Enterprises Group Worth Keeping An Eye On?

One important encouraging feature of Xin Yuan Enterprises Group is that it is growing profits.   If that's not enough on its own, there is also the rather notable levels of insider ownership.  That combination is very appealing. So yes, we do think the stock is worth keeping an eye on.     We don't want to rain on the parade too much, but we did also find 1 warning sign for Xin Yuan Enterprises Group that you need to be mindful of.  

Although Xin Yuan Enterprises 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.

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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.