Should You Be Adding Ningbo CixingLtd (SZSE:300307) To Your Watchlist Today?

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. 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. 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 Ningbo CixingLtd (SZSE:300307), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Ningbo CixingLtd

Ningbo CixingLtd's Improving Profits

In the last three years Ningbo CixingLtd's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, Ningbo CixingLtd's EPS shot from CN¥0.15 to CN¥0.38, over the last year. It's not often a company can achieve year-on-year growth of 153%.

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. It's noted that Ningbo CixingLtd's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While revenue is looking a bit flat, the good news is EBIT margins improved by 2.4 percentage points to 6.9%, in the last twelve months. That's a real positive.

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.

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 CixingLtd's balance sheet strength, before getting too excited.

Are Ningbo CixingLtd 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. So it is good to see that Ningbo CixingLtd insiders have a significant amount of capital invested in the stock. Holding CN¥635m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That holding amounts to 10% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.

Is Ningbo CixingLtd Worth Keeping An Eye On?

Ningbo CixingLtd's earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Ningbo CixingLtd for a spot on your watchlist. Before you take the next step you should know about the 2 warning signs for Ningbo CixingLtd 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.