With EPS Growth And More, Shanghai Fudan Microelectronics Group (HKG: 1385) is interesting

Like a puppy chasing its tail, some new investors are often looking for “the next big thing,” even if that means buying “history stocks” with no revenue, let alone profit. But as Warren Buffett said, “If you’ve been playing poker for half an hour and you still don’t know who the sucker is, you’re the sucker.” When buying such stocks, investors are too often suckers.

So if you’re like me, you might be more interested in profitable and growing companies, like Shanghai Fudan Microelectronics Group (HKG:1385). Although profit is not necessarily a social good, it is easy to admire a company that can produce it consistently. Loss-making businesses are always in a race against time to achieve financial viability, but time is often the friend of a profitable business, especially if it is growing.

Check out our latest analysis for Shanghai Fudan Microelectronics Group

How fast is Shanghai Fudan Microelectronics Group growing earnings per share?

Over the past three years, Shanghai Fudan Microelectronics Group has grown its earnings per share (EPS) like a young bamboo after the rain; fast and from a low base. So I don’t think the percentage growth rate is particularly meaningful. Accordingly, I will instead zoom in on growth over the past year. Like a firecracker in the night sky, Shanghai Fudan Microelectronics Group’s EPS jumped from ¥0.27 to ¥0.81 over the past year. You don’t see 200% year-over-year growth like that very often. This could be a sign that the company has reached a real inflection point.

One way to check a company’s growth is to look at the evolution of its revenues and its earnings before interest and taxes (EBIT) margins. The good news is that the Shanghai Fudan Microelectronics Group is increasing its revenue and EBIT margins have improved by 18.8 percentage points to 25% compared to last year. It’s great to see, on both counts.

You can check the company’s revenue and profit growth trend in the table below. For more details, click on the image.

SEHK: 1385 Earnings & Revenue History May 19, 2022

While it’s always good to see growing profits, you should always remember that a weak balance sheet could come back strong. So check the strength of Shanghai Fudan Microelectronics Group’s balance sheet, before you get too excited.

Are Shanghai Fudan Microelectronics Group Insiders Aligned with All Shareholders?

Given that Shanghai Fudan Microelectronics Group has a market capitalization of HK$40 billion, we wouldn’t expect insiders to hold a high percentage of shares. But we are reassured by the fact that they have invested in the company. Indeed, they have invested a mountain of sparkling wealth there, currently valued at 1.1 billion Canadian yen. This suggests to me that management will be very mindful of shareholder interests when making decisions!

Does the Shanghai Fudan Microelectronics group deserve to be watched?

Shanghai Fudan Microelectronics Group’s earnings per share took off like a rocket aiming straight for the moon. This type of growth is simply eye-catching, and the significant investment held by insiders certainly informs my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economy. So yes, on this short analysis, I think it’s worth considering Shanghai Fudan Microelectronics Group for a spot on your watch list. However, you should always think about the risks. Concrete example, we spotted 2 warning signs for Shanghai Fudan Microelectronics Group you should be aware.

Although Shanghai Fudan Microelectronics Group looks good to me, I would prefer insiders to buy stocks. If you also like to see insiders buy, then this free list of growing companies that insiders are buying might be exactly what you are looking for.

Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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