Here's Why Hangzhou SF Intra-city Industrial (HKG:9699) Has Caught The Eye Of Investors

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Hangzhou SF Intra-city Industrial (HKG:9699). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

How Fast Is Hangzhou SF Intra-city Industrial Growing Its Earnings Per Share?

Over the last three years, Hangzhou SF Intra-city Industrial has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Hangzhou SF Intra-city Industrial's EPS shot from CN¥0.07 to CN¥0.14, over the last year. It's a rarity to see 108% year-on-year growth like that. The best case scenario? That the business has hit a true inflection point.

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. Hangzhou SF Intra-city Industrial maintained stable EBIT margins over the last year, all while growing revenue 27% to CN¥16b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

View our latest analysis for Hangzhou SF Intra-city Industrial

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Hangzhou SF Intra-city Industrial's future EPS 100% free.

Are Hangzhou SF Intra-city Industrial 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. Shareholders will be pleased by the fact that insiders own Hangzhou SF Intra-city Industrial shares worth a considerable sum. To be specific, they have CN¥98m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 1.2% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Hangzhou SF Intra-city Industrial with market caps between CN¥2.9b and CN¥12b is about CN¥3.2m.

The Hangzhou SF Intra-city Industrial CEO received CN¥2.4m in compensation for the year ending 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 Hangzhou SF Intra-city Industrial To Your Watchlist?

Hangzhou SF Intra-city Industrial's earnings per share growth have been climbing higher at an appreciable rate. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Hangzhou SF Intra-city Industrial is certainly doing some things right and is well worth investigating. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Hangzhou SF Intra-city Industrial shapes up to industry peers, when it comes to ROE.

Although Hangzhou SF Intra-city Industrial 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 Hong Kong 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.