Is Now The Time To Put Shenzhen Sinexcel ElectricLtd (SZSE:300693) On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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 Shenzhen Sinexcel ElectricLtd (SZSE:300693). 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.

View our latest analysis for Shenzhen Sinexcel ElectricLtd

How Quickly Is Shenzhen Sinexcel ElectricLtd Increasing Earnings Per Share?

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. Recognition must be given to the that Shenzhen Sinexcel ElectricLtd has grown EPS by 49% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. EBIT margins for Shenzhen Sinexcel ElectricLtd remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 64% to CN¥2.8b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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 Shenzhen Sinexcel ElectricLtd's future EPS 100% free.

Are Shenzhen Sinexcel ElectricLtd Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shenzhen Sinexcel ElectricLtd followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Notably, they have an enviable stake in the company, worth CN¥2.1b. That equates to 30% of the company, making insiders powerful and aligned with other shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

Is Shenzhen Sinexcel ElectricLtd Worth Keeping An Eye On?

Shenzhen Sinexcel ElectricLtd's earnings have taken off in quite an impressive fashion. 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 Shenzhen Sinexcel ElectricLtd for a spot on your watchlist. What about risks? Every company has them, and we've spotted 2 warning signs for Shenzhen Sinexcel ElectricLtd (of which 1 is significant!) you should know about.

Although Shenzhen Sinexcel ElectricLtd certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Chinese companies that not only boast of strong growth but have strong insider backing.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com