Does Ningbo Ligong Environment And Energy TechnologyLtd (SZSE:002322) Deserve A Spot On Your Watchlist?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Ningbo Ligong Environment And Energy TechnologyLtd (SZSE:002322). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Ningbo Ligong Environment And Energy TechnologyLtd with the means to add long-term value to shareholders.

View our latest analysis for Ningbo Ligong Environment And Energy TechnologyLtd

Ningbo Ligong Environment And Energy TechnologyLtd's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. We can see that in the last three years Ningbo Ligong Environment And Energy TechnologyLtd grew its EPS by 11% per year. That growth rate is fairly good, assuming the company can keep it up.

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. The music to the ears of Ningbo Ligong Environment And Energy TechnologyLtd shareholders is that EBIT margins have grown from 19% to 27% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

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.

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 Ningbo Ligong Environment And Energy TechnologyLtd's balance sheet strength, before getting too excited.

Are Ningbo Ligong Environment And Energy TechnologyLtd 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. So it is good to see that Ningbo Ligong Environment And Energy TechnologyLtd insiders have a significant amount of capital invested in the stock. Given insiders own a significant chunk of shares, currently valued at CN¥562m, they have plenty of motivation to push the business to succeed. That holding amounts to 12% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.

Does Ningbo Ligong Environment And Energy TechnologyLtd Deserve A Spot On Your Watchlist?

One important encouraging feature of Ningbo Ligong Environment And Energy TechnologyLtd is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Before you take the next step you should know about the 2 warning signs for Ningbo Ligong Environment And Energy TechnologyLtd (1 can't be ignored!) that we have uncovered.

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.