If EPS Growth Is Important To You, Zhejiang Sanhua Intelligent ControlsLtd (SZSE:002050) Presents An Opportunity

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Zhejiang Sanhua Intelligent ControlsLtd (SZSE:002050), 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 Zhejiang Sanhua Intelligent ControlsLtd with the means to add long-term value to shareholders.

See our latest analysis for Zhejiang Sanhua Intelligent ControlsLtd

Zhejiang Sanhua Intelligent ControlsLtd'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 Zhejiang Sanhua Intelligent ControlsLtd has managed to grow EPS by 28% 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.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of Zhejiang Sanhua Intelligent ControlsLtd's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Zhejiang Sanhua Intelligent ControlsLtd maintained stable EBIT margins over the last year, all while growing revenue 24% to CN¥25b. That's encouraging news for the company!

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 Zhejiang Sanhua Intelligent ControlsLtd's future EPS 100% free.

Are Zhejiang Sanhua Intelligent ControlsLtd Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CN¥80b company like Zhejiang Sanhua Intelligent ControlsLtd. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. We note that their impressive stake in the company is worth CN¥902m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Does Zhejiang Sanhua Intelligent ControlsLtd Deserve A Spot On Your Watchlist?

You can't deny that Zhejiang Sanhua Intelligent ControlsLtd has grown its earnings per share at a very impressive rate. That's attractive. 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. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Zhejiang Sanhua Intelligent ControlsLtd , and understanding this should be part of your investment process.

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.