It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Tianjin Pharmaceutical Da Ren Tang Group (SHSE:600329). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

How Fast Is Tianjin Pharmaceutical Da Ren Tang Group Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Tianjin Pharmaceutical Da Ren Tang Group managed to grow EPS by 14% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

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. While revenue is looking a bit flat, the good news is EBIT margins improved by 2.4 percentage points to 11%, in the last twelve months. That's something to smile about.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Tianjin Pharmaceutical Da Ren Tang Group?

Are Tianjin Pharmaceutical Da Ren Tang Group Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Tianjin Pharmaceutical Da Ren Tang Group insiders have a significant amount of capital invested in the stock. To be specific, they have CN¥323m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 1.6% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Tianjin Pharmaceutical Da Ren Tang Group, with market caps between CN¥14b and CN¥46b, is around CN¥1.6m.

Tianjin Pharmaceutical Da Ren Tang Group's CEO took home a total compensation package worth CN¥1.1m in the year leading up to December 2022. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Tianjin Pharmaceutical Da Ren Tang Group Worth Keeping An Eye On?

As previously touched on, Tianjin Pharmaceutical Da Ren Tang Group is a growing business, which is encouraging. The growth of EPS may be the eye-catching headline for Tianjin Pharmaceutical Da Ren Tang Group, but there's more to bring joy for shareholders. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. We should say that we've discovered 1 warning sign for Tianjin Pharmaceutical Da Ren Tang Group that you should be aware of before investing here.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in CN with promising growth potential and insider confidence.

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.