Here's Why We Think ShenZhen Woer Heat-Shrinkable MaterialLtd (SZSE:002130) Is Well Worth Watching

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. 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.

In contrast to all that, many investors prefer to focus on companies like ShenZhen Woer Heat-Shrinkable MaterialLtd (SZSE:002130), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for ShenZhen Woer Heat-Shrinkable MaterialLtd

How Fast Is ShenZhen Woer Heat-Shrinkable MaterialLtd Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, ShenZhen Woer Heat-Shrinkable MaterialLtd has grown EPS by 18% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. Not all of ShenZhen Woer Heat-Shrinkable MaterialLtd'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. The good news is that ShenZhen Woer Heat-Shrinkable MaterialLtd is growing revenues, and EBIT margins improved by 2.6 percentage points to 17%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for ShenZhen Woer Heat-Shrinkable MaterialLtd.

Are ShenZhen Woer Heat-Shrinkable MaterialLtd Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own ShenZhen Woer Heat-Shrinkable MaterialLtd shares worth a considerable sum. Notably, they have an enviable stake in the company, worth CN¥2.8b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Should You Add ShenZhen Woer Heat-Shrinkable MaterialLtd To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into ShenZhen Woer Heat-Shrinkable MaterialLtd's strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in ShenZhen Woer Heat-Shrinkable MaterialLtd's continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. You should always think about risks though. Case in point, we've spotted 2 warning signs for ShenZhen Woer Heat-Shrinkable MaterialLtd you should be aware of, and 1 of them is significant.

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.