Here's Why Zhejiang Taotao Vehicles (SZSE:301345) Has Caught The Eye Of Investors

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 Zhejiang Taotao Vehicles (SZSE:301345). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Zhejiang Taotao Vehicles with the means to add long-term value to shareholders.

View our latest analysis for Zhejiang Taotao Vehicles

How Fast Is Zhejiang Taotao Vehicles Growing Its Earnings Per Share?

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. It's good to see that Zhejiang Taotao Vehicles' EPS has grown from CN¥2.74 to CN¥3.01 over twelve months. That's a 10% gain; respectable growth in the broader scheme of things.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Zhejiang Taotao Vehicles achieved similar EBIT margins to last year, revenue grew by a solid 55% to CN¥2.8b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Zhejiang Taotao Vehicles' future EPS 100% free.

Are Zhejiang Taotao Vehicles Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Zhejiang Taotao Vehicles insiders own a meaningful share of the business. To be exact, company insiders hold 69% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. At the current share price, that insider holding is worth a staggering CN¥4.2b. That level of investment from insiders is nothing to sneeze at.

Does Zhejiang Taotao Vehicles Deserve A Spot On Your Watchlist?

One important encouraging feature of Zhejiang Taotao Vehicles is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination definitely favoured by investors so consider keeping the company on a watchlist. It is worth noting though that we have found 2 warning signs for Zhejiang Taotao Vehicles that you need to take into consideration.

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 tailored list of Chinese companies which have demonstrated growth backed by significant insider holdings.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.