Is Now The Time To Put Hunan Oil Pump (SHSE:603319) On Your Watchlist?

Simply Wall St · 10/18 22:30

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Hunan Oil Pump (SHSE:603319). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Hunan Oil Pump with the means to add long-term value to shareholders.

Check out our latest analysis for Hunan Oil Pump

How Quickly Is Hunan Oil Pump Increasing Earnings Per Share?

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. Over the last three years, Hunan Oil Pump has grown EPS by 6.5% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

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. While we note Hunan Oil Pump achieved similar EBIT margins to last year, revenue grew by a solid 14% to CN¥2.0b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
SHSE:603319 Earnings and Revenue History October 18th 2024

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Hunan Oil Pump's balance sheet strength, before getting too excited.

Are Hunan Oil Pump Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Hunan Oil Pump insiders have a significant amount of capital invested in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at CN¥1.3b. That equates to 33% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Is Hunan Oil Pump Worth Keeping An Eye On?

One important encouraging feature of Hunan Oil Pump 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. What about risks? Every company has them, and we've spotted 1 warning sign for Hunan Oil Pump you should know about.

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.