Should You Be Adding Shanghai SK Automation TechnologyLtd (SHSE:688155) To Your Watchlist Today?

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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Shanghai SK Automation TechnologyLtd (SHSE:688155). 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.

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How Quickly Is Shanghai SK Automation TechnologyLtd Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, Shanghai SK Automation TechnologyLtd has achieved impressive annual EPS growth of 39%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. This approach makes Shanghai SK Automation TechnologyLtd look pretty good, on balance; although revenue is flattish, EBIT margins improved from 7.5% to 14% in the last year. That's something to smile about.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Check out our latest analysis for Shanghai SK Automation TechnologyLtd

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 Shanghai SK Automation TechnologyLtd's balance sheet strength, before getting too excited.

Are Shanghai SK Automation TechnologyLtd Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Shanghai SK Automation TechnologyLtd insiders own a meaningful share of the business. Owning 45% of the company, insiders have plenty riding on the performance of the the share price. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. CN¥2.5b That means they have plenty of their own capital riding on the performance of the business!

Does Shanghai SK Automation TechnologyLtd Deserve A Spot On Your Watchlist?

Shanghai SK Automation TechnologyLtd's earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Shanghai SK Automation TechnologyLtd is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. We should say that we've discovered 2 warning signs for Shanghai SK Automation TechnologyLtd 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.