Is Now The Time To Put Hang Zhou Radical Energy-Saving Technology (SZSE:300652) On Your Watchlist?

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. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Hang Zhou Radical Energy-Saving Technology (SZSE:300652). 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.

Check out our latest analysis for Hang Zhou Radical Energy-Saving Technology

How Fast Is Hang Zhou Radical Energy-Saving Technology 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Hang Zhou Radical Energy-Saving Technology's EPS has grown 18% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. The good news is that Hang Zhou Radical Energy-Saving Technology is growing revenues, and EBIT margins improved by 2.1 percentage points to 17%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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 Hang Zhou Radical Energy-Saving Technology's balance sheet strength, before getting too excited.

Are Hang Zhou Radical Energy-Saving Technology Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own Hang Zhou Radical Energy-Saving Technology shares worth a considerable sum. As a matter of fact, their holding is valued at CN¥221m. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 7.4% of the shares on issue for the business, an appreciable amount considering the market cap.

Is Hang Zhou Radical Energy-Saving Technology Worth Keeping An Eye On?

For growth investors, Hang Zhou Radical Energy-Saving Technology's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Hang Zhou Radical Energy-Saving Technology's continuing strength. 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. However, before you get too excited we've discovered 1 warning sign for Hang Zhou Radical Energy-Saving Technology that you should be aware of.

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.