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Here’s why Zhejiang Cfmoto PowerLtd (SHSE:603129) has caught investors’ attention

The excitement of investing in a company that can turn around its fortunes is a major attraction for some speculators, so even companies that have no revenues, no profits and a history of failure can successfully find investors. But as Peter Lynch said in One on Wall Street, “Far plans almost never pay off.” A loss-making company has not yet proven itself in terms of profits and, eventually, the inflow of external capital may dry up.

If this type of business is not your style, and you like businesses that generate revenue, or even profits, then you may well be interested in Zhejiang Cfmoto PowerLtd (SHSE:603129). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Zhejiang Cfmoto PowerLtd with the means to add long-term shareholder value.

Check out our latest analysis for Zhejiang Cfmoto PowerLtd

How fast is Zhejiang Cfmoto PowerLtd growing?

If a company can keep its earnings per share (EPS) growing long enough, its stock price should eventually follow. It therefore makes sense for experienced investors to pay close attention to the company’s EPS when undertaking investment research. It’s certainly nice to see that Zhejiang Cfmoto PowerLtd managed to grow its EPS by 33% per year over three years. If the company can maintain this kind of growth, we expect shareholders to come away happy.

A close look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. It should be noted that Zhejiang Cfmoto PowerLtd’s revenue operations was lower than its turnover for the last twelve months, which could distort our analysis of its margins. The good news is that Zhejiang Cfmoto PowerLtd is growing revenue and its EBIT margins improved by 2.3 percentage points to 8.2% over the last year. It’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. Click on the chart to see the exact numbers.

income-and-income-history
SHSE: 603129 Profit and revenue history as of May 8, 2024

The trick, as an investor, is to find companies that are go to perform in the future, not just in the past. While crystal balls don’t exist, you can check our visualization of analyst consensus forecasts for Zhejiang Cfmoto PowerLtd’s future EPS, 100% free.

Are Zhejiang Cfmoto PowerLtd insiders aligned with all shareholders?

It is necessary for company managers to act in the best interests of shareholders and internal investments are therefore always a way of reassuring the market. Shareholders will be pleased that insiders own Zhejiang Cfmoto PowerLtd shares worth a considerable amount. Indeed, they invest considerable wealth there, currently valued at 735 million yen. This suggests that managers will be very attentive to the interests of shareholders when making decisions!

It’s good to see insiders invested in the company, but are the compensation levels reasonable? Well, based on the CEO’s salary, you’d say that’s indeed the case. For companies with market capitalizations between 14 billion yen and 46 billion yen, such as Zhejiang Cfmoto PowerLtd, the median CEO salary is around 1.5 million yen.

Zhejiang Cfmoto PowerLtd offered total compensation worth 1.2 million CN yen to its CEO for the year through December 2022. This seems quite reasonable, especially since it is below the median companies of similar size. Although the CEO’s pay level should not be the most important factor in how the company is perceived, modest compensation is a positive because it suggests that the board is keeping in mind the interests of shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does Zhejiang Cfmoto PowerLtd deserve a spot on your watchlist?

You can’t deny that Zhejiang Cfmoto PowerLtd has been growing its earnings per share at a very impressive rate. It’s attractive. If that’s not enough, also consider that CEO compensation is quite reasonable and insiders are well invested alongside other shareholders. Everyone has their own investment preferences, but this definitely makes Zhejiang Cfmoto PowerLtd look rather interesting. We should say that we discovered 2 warning signs for Zhejiang Cfmoto PowerLtd (1 is a bit worrying!) which you should be aware of before investing here.

It is still possible to succeed by buying stocks that are not growing income and not have insiders buying shares. But for those who consider these metrics important, we encourage you to check out companies that TO DO have these characteristics. You can access a personalized list of Chinese companies that have demonstrated sustained growth through recent insider buying.

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

The assessment is complex, but we help to simplify it.

Find out if Zhejiang Cfmoto PowerLtd is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

See the free analysis

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to constitute financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or your financial situation. Our goal is to provide you with targeted, long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.