Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Dongyue Group (HKG:189). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Dongyue Group

How Fast Is Dongyue Group Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Dongyue Group has managed to grow EPS by 19% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The good news is that Dongyue Group is growing revenues, and EBIT margins improved by 12.3 percentage points to 25%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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.

Fortunately, we've got access to analyst forecasts of Dongyue Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Dongyue Group Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

With strong conviction, Dongyue Group insiders have stood united by refusing to sell shares over the last year. But more importantly, CFO, VP & Executive Director Zhefeng Zhang spent CN¥1.5m acquiring shares, doing so at an average price of CN¥14.72. Purchases like this clue us in to the to the faith management has in the business' future.

Along with the insider buying, another encouraging sign for Dongyue Group is that insiders, as a group, have a considerable shareholding. Indeed, they have a considerable amount of wealth invested in it, currently valued at CN¥2.4b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Should You Add Dongyue Group To Your Watchlist?

For growth investors, Dongyue Group's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. So it's fair to say that this stock may well deserve a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Dongyue Group (at least 1 which is a bit concerning) , and understanding these should be part of your investment process.

The good news is that Dongyue Group is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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.