Does Shijiazhuang Kelin Electric (SHSE:603050) Deserve A Spot On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Shijiazhuang Kelin Electric (SHSE:603050). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shijiazhuang Kelin Electric with the means to add long-term value to shareholders.

View our latest analysis for Shijiazhuang Kelin Electric

Shijiazhuang Kelin Electric's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Shijiazhuang Kelin Electric has managed to grow EPS by 20% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Shijiazhuang Kelin Electric achieved similar EBIT margins to last year, revenue grew by a solid 44% to CN¥3.5b. That's progress.

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 profitability drives the upside, prudent investors always check the balance sheet, too.

Are Shijiazhuang Kelin Electric 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. Shijiazhuang Kelin Electric followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they have a considerable amount of wealth invested in it, currently valued at CN¥1.2b. This totals to 31% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Looking very optimistic for investors.

Does Shijiazhuang Kelin Electric Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Shijiazhuang Kelin Electric'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. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. We don't want to rain on the parade too much, but we did also find 3 warning signs for Shijiazhuang Kelin Electric (1 is potentially serious!) that you need to be mindful 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.