With EPS growth and other factors, Keboda Technology (SHSE:603786) presents an interesting case.

For the uninitiated, buying a company that has a good story to tell investors, even if it doesn't currently have a track record of revenue or profits, might seem like a good idea (and an exciting prospect). But as Peter Lynch puts it, Winning on Wall Street“Long-term investments rarely pay off.” Unprofitable companies can act as a sponge, so investors need to be careful not to dump money into them.

If this isn't your style, but you like companies that generate revenue and make a profit, you might be interested in companies like these: Keboda Technology (SHSE:603786). This isn't necessarily an indication that it's undervalued, but the profitability of the business is good enough to justify some valuation, especially if it's growing.

Check out our latest analysis for KEBODA TECHNOLOGY

HOW FAST IS KEBODA TECHNOLOGY GROWING?

The market is a voting machine in the short term, but a weighing machine in the long term. Therefore, stock prices are expected to ultimately follow earnings per share (EPS) results. That means EPS growth is considered a real positive by most successful long term investors. KEBODA TECHNOLOGY has managed to grow its EPS at 8.7% per year over three years. If the company can maintain this, this is a pretty good growth rate.

To get another perspective on the quality of a company's growth, it's often useful to look at its earnings before interest and tax (EBIT) margins and revenue growth rate. Not all of KEBODA TECHNOLOGY's revenue this year is revenue. From the ManagementSo keep in mind that the revenue and margin figures used in this article may not be the most representative of the underlying business.KEBODA TECHNOLOGY maintained stable EBIT margins last year and grew revenue by 44% to RMB5.1b, which is really good.

The graph below depicts how the company's earnings and revenue have progressed over time, and you can click on the image to see greater detail.

Although we live in the present, there's no doubt that the future is of utmost importance in the investment decision process, so why not check out this interactive chart showing future EPS forecasts for KEBODA TECHNOLOGY?

Are KEBODA TECHNOLOGY insiders aligned with all shareholders?

It's imperative that company leaders put shareholder interests first, so insider investment is always a reassuring sign for the market. Therefore, it's good to see that KEBODA TECHNOLOGY insiders have a significant amount of capital invested in the company's shares. Their stake in the company amounts to RMB3.5b, which equates to 13% of the company, indicating that insiders are powerful and well-aligned with other shareholders. This is very optimistic for investors.

It's good to see insiders invested in the company, but are compensation levels reasonable? Our quick analysis of CEO compensation suggests it is at a reasonable level. The median total compensation for CEOs of companies the same size as KEBODA TECHNOLOGY, with market capitalizations between RMB14b-46b, is around RMB1.5m.

The CEO of KEBODA TECHNOLOGY received a total compensation package worth RMB 1.1 million for the year ending December 2022, which is actually below the median for CEOs of similar-sized companies. Although the CEO's compensation level is not the most important indicator for investors, modest compensation can lead to stronger alignment between the CEO and general shareholders. In a broader sense, it can also be seen as a sign of a culture of integrity.

Should I add KEBODA TECHNOLOGY to my watchlist?

As we mentioned before, KEBODA TECHNOLOGY is a growing company, which is encouraging. The fact that EPS is growing is a real positive for KEBODA TECHNOLOGY, but there's more to be happy about. With company insiders fairly aligned with the company's success and the CEO's compensation modest, we have no arguing that this stock is worth considering. However, you should always consider the ever-present threat of investment risk. We've identified 1 warning sign Understanding KEBODA TECHNOLOGY should be part of your investment process.

KEBODA TECHNOLOGY certainly looks good, but if insiders have been buying up shares it might attract more investors. If you want to see companies that are taking on more risk, check out some handpicked Chinese companies that not only boast strong growth but also have strong insider backing.

Please note that the insider transactions discussed in this article are reportable transactions in the relevant jurisdictions.

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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.