Does Shenzhen Liande Automation Equipmentltd (SZSE:300545) Deserve A Spot On Your Watchlist?

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. 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 Shenzhen Liande Automation Equipmentltd (SZSE:300545), 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.

See our latest analysis for Shenzhen Liande Automation Equipmentltd

Shenzhen Liande Automation Equipmentltd's Improving Profits

Over the last three years, Shenzhen Liande Automation Equipmentltd has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Shenzhen Liande Automation Equipmentltd's EPS shot up from CN¥0.88 to CN¥1.37; a result that's bound to keep shareholders happy. That's a commendable gain of 56%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that Shenzhen Liande Automation Equipmentltd is growing revenues, and EBIT margins improved by 7.1 percentage points to 21%, over the last year. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, 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 Shenzhen Liande Automation Equipmentltd's balance sheet strength, before getting too excited.

Are Shenzhen Liande Automation Equipmentltd Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So we're pleased to report that Shenzhen Liande Automation Equipmentltd insiders own a meaningful share of the business. In fact, they own 50% of the shares, making insiders a very influential shareholder group. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. This is an incredible endorsement from them.

Does Shenzhen Liande Automation Equipmentltd Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Shenzhen Liande Automation Equipmentltd's strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Still, you should learn about the 1 warning sign we've spotted with Shenzhen Liande Automation Equipmentltd.

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.