If EPS Growth Is Important To You, Sunlands Technology Group (NYSE:STG) Presents An Opportunity
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Sunlands Technology Group (NYSE:STG). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Sunlands Technology Group
How Fast Is Sunlands Technology Group Growing Its Earnings Per Share?
Sunlands Technology Group has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. In previous twelve months, Sunlands Technology Group's EPS has risen from CN¥45.48 to CN¥48.46. That's a fair increase of 6.6%.
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. We note that while EBIT margins have improved from 24% to 28%, the company has actually reported a fall in revenue by 5.9%. That falls short of ideal.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
Sunlands Technology Group isn't a huge company, given its market capitalisation of US$137m. That makes it extra important to check on its balance sheet strength.
Are Sunlands Technology Group Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Sunlands Technology Group insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 52%, company insiders are in control and have plenty of capital behind the venture. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. To give you an idea, the value of insiders' holdings in the business are valued at CN¥71m at the current share price. That's nothing to sneeze at!
Should You Add Sunlands Technology Group To Your Watchlist?
One important encouraging feature of Sunlands Technology Group is that it is growing profits. To add an extra spark to the fire, significant insider ownership in the company is another highlight. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Sunlands Technology Group that you should be aware of.
Although Sunlands Technology Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of companies that not only boast of strong growth but have also seen recent insider buying..
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.
