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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Anhui Huaheng Biotechnology (SHSE:688639). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Anhui Huaheng Biotechnology's Earnings Per Share Are 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. Anhui Huaheng Biotechnology's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 42%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. Our analysis has highlighted that Anhui Huaheng Biotechnology's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. EBIT margins for Anhui Huaheng Biotechnology 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¥2.0b. 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. Click on the chart to see the exact numbers.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Anhui Huaheng Biotechnology's forecast profits?

Are Anhui Huaheng Biotechnology Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Anhui Huaheng Biotechnology insiders have a significant amount of capital invested in the stock. Notably, they have an enviable stake in the company, worth CN¥3.5b. That equates to 31% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations between CN¥7.3b and CN¥23b, like Anhui Huaheng Biotechnology, the median CEO pay is around CN¥1.4m.

Anhui Huaheng Biotechnology offered total compensation worth CN¥1.0m to its CEO in the year to December 2023. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Should You Add Anhui Huaheng Biotechnology To Your Watchlist?

Anhui Huaheng Biotechnology's earnings per share have been soaring, with growth rates sky high. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The strong EPS improvement suggests the businesses is humming along. Anhui Huaheng Biotechnology is certainly doing some things right and is well worth investigating. We should say that we've discovered 3 warning signs for Anhui Huaheng Biotechnology (2 make us uncomfortable!) that you should be aware of before investing here.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Chinese companies which have demonstrated growth backed by significant insider holdings.

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.

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