The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Vipshop Holdings (NYSE:VIPS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Vipshop Holdings with the means to add long-term value to shareholders.

Vipshop Holdings' Earnings Per Share Are 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. Impressively, Vipshop Holdings has grown EPS by 20% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. Not all of Vipshop Holdings' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note Vipshop Holdings achieved similar EBIT margins to last year, revenue grew by a solid 9.4% to CN¥113b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

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

Are Vipshop Holdings Insiders Aligned With All Shareholders?

Owing to the size of Vipshop Holdings, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at CN¥2.0b. That equates to 23% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.

Does Vipshop Holdings Deserve A Spot On Your Watchlist?

For growth investors, Vipshop Holdings' raw rate of earnings growth is a beacon in the night. 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. 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 Vipshop Holdings that we have uncovered.

Although Vipshop Holdings 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.