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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Luxshare Precision Industry (SZSE:002475). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

How Quickly Is Luxshare Precision Industry Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Luxshare Precision Industry managed to grow EPS by 14% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Luxshare Precision Industry remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 5.4% to CN¥234b. 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.

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

Are Luxshare Precision Industry Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CN¥277b company like Luxshare Precision Industry. But we are reassured by the fact they have invested in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at CN¥778m. While that is a lot of skin in the game, we note this holding only totals to 0.3% of the business, which is a result of the company being so large. This should still be a great incentive for management to maximise shareholder value.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. The median total compensation for CEOs of companies similar in size to Luxshare Precision Industry, with market caps over CN¥58b, is around CN¥2.9m.

The Luxshare Precision Industry CEO received CN¥2.0m in compensation for the year ending December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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.

Is Luxshare Precision Industry Worth Keeping An Eye On?

One positive for Luxshare Precision Industry is that it is growing EPS. That's nice to see. The growth of EPS may be the eye-catching headline for Luxshare Precision Industry, but there's more to bring joy for shareholders. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. If you think Luxshare Precision Industry might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.

Although Luxshare Precision Industry certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Chinese companies that not only boast of strong growth but have strong insider backing.

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