We Ran A Stock Scan For Earnings Growth And Ningbo Sanxing Medical ElectricLtd (SHSE:601567) Passed With Ease

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable 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.

View our latest analysis for Ningbo Sanxing Medical ElectricLtd

Ningbo Sanxing Medical ElectricLtd's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Ningbo Sanxing Medical ElectricLtd has managed to grow EPS by 21% per year 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.

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. The good news is that Ningbo Sanxing Medical ElectricLtd is growing revenues, and EBIT margins improved by 6.0 percentage points to 15%, over the last year. Both of which are great metrics to check off for potential growth.

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.

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

Are Ningbo Sanxing Medical ElectricLtd Insiders Aligned With All Shareholders?

Owing to the size of Ningbo Sanxing Medical ElectricLtd, we wouldn't expect insiders to hold a significant proportion of the company. 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¥9.3b. That equates to 24% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Should You Add Ningbo Sanxing Medical ElectricLtd To Your Watchlist?

You can't deny that Ningbo Sanxing Medical ElectricLtd has grown its earnings per share at a very impressive rate. That's attractive. 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. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Before you take the next step you should know about the 1 warning sign for Ningbo Sanxing Medical ElectricLtd that we have uncovered.

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 recent insider purchases.

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.