Do Jiangsu Huachen Transformer's (SHSE:603097) Earnings Warrant Your Attention?

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. 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.

In contrast to all that, many investors prefer to focus on companies like Jiangsu Huachen Transformer (SHSE:603097), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Jiangsu Huachen Transformer with the means to add long-term value to shareholders.

See our latest analysis for Jiangsu Huachen Transformer

How Quickly Is Jiangsu Huachen Transformer Increasing Earnings Per Share?

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. We can see that in the last three years Jiangsu Huachen Transformer grew its EPS by 7.7% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

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. Jiangsu Huachen Transformer shareholders can take confidence from the fact that EBIT margins are up from 6.3% to 9.6%, and revenue is growing. 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. Click on the chart to see the exact numbers.

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 Jiangsu Huachen Transformer's balance sheet strength, before getting too excited.

Are Jiangsu Huachen Transformer Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Jiangsu Huachen Transformer insiders own a meaningful share of the business. To be exact, company insiders hold 70% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. And their holding is extremely valuable at the current share price, totalling CN¥2.4b. That means they have plenty of their own capital riding on the performance of the business!

Is Jiangsu Huachen Transformer Worth Keeping An Eye On?

As previously touched on, Jiangsu Huachen Transformer is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Jiangsu Huachen Transformer , and understanding it should be part of your investment process.

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.