For the uninitiated, it may seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it doesn’t currently have a track record of revenue or profits. But as Peter Lynch said in Wall Street Strikes Back, “long shots rarely pay off.” Unprofitable companies can act like sponges that soak up capital, so investors need to be careful not to put their money where their mouths are.
If this type of company isn’t your cup of tea, but you do like companies that generate revenue and make profits, then you might be interested in Ningbo Ligong Environment And Energy Technology Ltd (SZSE:002322). Even though the company is fairly valued by the market, investors will likely agree that Ningbo Ligong Environment And Energy Technology Ltd will continue to generate profits, providing a means to add long-term value to shareholders.
View our latest analysis for Ningbo Ligong Environment And Energy Technology Ltd.
Ningbo Ligong Environmental Energy Technology Co., Ltd.’s earnings per share are increasing
If we believe markets are at all efficient, then over the long term we would expect a company’s share price to follow its earnings per share (EPS), as growth in EPS is an attractive feature of any company. Over the past three years, Ningbo Ligong Environment And Energy Technology Ltd’s EPS has grown at 11% per year, which is quite good, assuming the company can maintain this growth rate.
Careful consideration of revenue growth and earnings before interest and tax (EBIT) margins can help us form a view on the sustainability of the recent profit growth. The good news for Ningbo Ligong Environmental Energy Technology Co., Ltd. shareholders is that EBIT margins have grown from 19% to 27% over the last twelve months, and revenue is also on an upward trend, which is great on both counts.
In the chart below, you can see how the company’s earnings and revenue have grown over time: Click on the chart to see the actual numbers.
SZSE:002322 Earnings and Revenue History September 26, 2024
While it’s always good to see profits growing, you should always remember that a weak balance sheet can hurt you later, so before you get too excited, check the strength of Ningbo Ligong Environment And Energy Technology Ltd’s balance sheet.
Are Ningbo Ligong Environment And Energy Technology Ltd. insiders aligned with all shareholders?
It’s good to see company leaders putting their own money on the line, so to speak, because it promotes alignment of incentives between the people running the business and the true owners. So it’s good to see Ningbo Ligong Environmental Energy Technology Co., Ltd. insiders have a lot of capital invested in the stock. Given that insiders own a significant amount of stock, currently valued at RMB562m, they have plenty of incentive to run the business successfully. Their holdings equate to 12% of the shares issued, making them influential owners in the business and aligning their interests with shareholders.
Is Ningbo Ligong Environment And Energy Technology Ltd. worth being on your watch list?
One of the key encouraging features of Ningbo Ligong Environment And Energy Technology Ltd is that it is growing earnings. For those looking for even more profit, the high insider ownership adds to our enthusiasm for this growth. This combination is very attractive, so yes, we think this stock is worth keeping an eye on. Before you take the next step, you should be aware of the 2 warning signs we’ve spotted for Ningbo Ligong Environment And Energy Technology Ltd (1 can’t be ignored!)
Picking stocks with neither earnings growth nor insider buying can pay off, but for investors who care about these key metrics, below is a handpicked list of CN companies with promising growth potential and insider confidence.
Please note that the insider transactions discussed in this article are reportable transactions in the relevant jurisdictions.
Valuation is complicated, but we’re here to simplify it.
Through a detailed analysis including fair value estimates, potential risks, dividends, insider transactions, financial status, and more, we determine whether Ningbo Ligong Environment And Energy Technology Ltd is undervalued or overvalued.
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please 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 herein.
