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. 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 Zhejiang Jingsheng Mechanical & Electrical (SZSE:300316). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Zhejiang Jingsheng Mechanical & Electrical with the means to add long-term value to shareholders.

Zhejiang Jingsheng Mechanical & Electrical's Improving Profits

In the last three years Zhejiang Jingsheng Mechanical & Electrical's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Zhejiang Jingsheng Mechanical & Electrical's EPS skyrocketed from CN¥2.03 to CN¥3.39, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 67%.

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. It's noted that Zhejiang Jingsheng Mechanical & Electrical's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Zhejiang Jingsheng Mechanical & Electrical maintained stable EBIT margins over the last year, all while growing revenue 76% to CN¥17b. That's a real positive.

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

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Zhejiang Jingsheng Mechanical & Electrical's future profits.

Are Zhejiang Jingsheng Mechanical & Electrical Insiders Aligned With All Shareholders?

Owing to the size of Zhejiang Jingsheng Mechanical & Electrical, we wouldn't expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Notably, they have an enviable stake in the company, worth CN¥3.7b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Should You Add Zhejiang Jingsheng Mechanical & Electrical To Your Watchlist?

You can't deny that Zhejiang Jingsheng Mechanical & Electrical has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Zhejiang Jingsheng Mechanical & Electrical (at least 1 which is significant) , and understanding them should be part of your investment process.

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.