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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Zhejiang Wellsun Intelligent TechnologyLtd (SZSE:300882). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Zhejiang Wellsun Intelligent TechnologyLtd with the means to add long-term value to shareholders.

Check out our latest analysis for Zhejiang Wellsun Intelligent TechnologyLtd

How Quickly Is Zhejiang Wellsun Intelligent TechnologyLtd Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Zhejiang Wellsun Intelligent TechnologyLtd has managed to grow EPS by 21% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Our analysis has highlighted that Zhejiang Wellsun Intelligent TechnologyLtd's revenue from operations did not account for all of their revenue last year, so our analysis of its margins might not accurately reflect the underlying business. Zhejiang Wellsun Intelligent TechnologyLtd shareholders can take confidence from the fact that EBIT margins are up from 8.3% to 19%, and revenue is growing. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Zhejiang Wellsun Intelligent TechnologyLtd's balance sheet strength, before getting too excited.

Are Zhejiang Wellsun Intelligent TechnologyLtd Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Zhejiang Wellsun Intelligent TechnologyLtd insiders have a significant amount of capital invested in the stock. With a whopping CN¥417m worth of shares as a group, insiders have plenty riding on the company's success. At 10% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.

Should You Add Zhejiang Wellsun Intelligent TechnologyLtd To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Zhejiang Wellsun Intelligent TechnologyLtd's strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Before you take the next step you should know about the 1 warning sign for Zhejiang Wellsun Intelligent TechnologyLtd that we have uncovered.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.