It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in San Fang Chemical Industry (TWSE:1307). 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.
Check out our latest analysis for San Fang Chemical Industry
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, San Fang Chemical Industry has grown EPS by 36% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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. Despite the relatively flat revenue figures, shareholders will be pleased to see EBIT margins have grown from 6.0% to 12% in the last 12 months. That's a real positive.
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.
While profitability drives the upside, prudent investors always check the balance sheet, too.
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. Shareholders will be pleased by the fact that insiders own San Fang Chemical Industry shares worth a considerable sum. Notably, they have an enviable stake in the company, worth NT$3.7b. This totals to 22% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Looking very optimistic for investors.
For growth investors, San Fang Chemical Industry's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in San Fang Chemical Industry's continuing strength. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with San Fang Chemical Industry , and understanding it should be part of your investment process.
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 Taiwanese 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.