Does Ningbo Sanxing Medical ElectricLtd (SHSE:601567) Deserve A Spot On Your Watchlist?

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 Ningbo Sanxing Medical ElectricLtd (SHSE:601567). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Ningbo Sanxing Medical ElectricLtd with the means to add long-term value to shareholders.

See our latest analysis for Ningbo Sanxing Medical ElectricLtd

How Quickly Is Ningbo Sanxing Medical ElectricLtd Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Ningbo Sanxing Medical ElectricLtd has grown EPS by 31% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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 Ningbo Sanxing Medical ElectricLtd is growing revenues, and EBIT margins improved by 2.2 percentage points to 16%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

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 Ningbo Sanxing Medical ElectricLtd's future EPS 100% free.

Are Ningbo Sanxing Medical ElectricLtd Insiders Aligned With All Shareholders?

Since Ningbo Sanxing Medical ElectricLtd has a market capitalisation of CN¥47b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at CN¥11b. Coming in at 24% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.

Is Ningbo Sanxing Medical ElectricLtd Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Ningbo Sanxing Medical ElectricLtd's strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. 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 Ningbo Sanxing Medical ElectricLtd that you should be aware of.

Although Ningbo Sanxing Medical ElectricLtd certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Chinese companies that not only boast of strong growth but have strong insider backing.

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.