Should You Be Adding Guangdong TCL Smart Home Appliances (SZSE:002668) To Your Watchlist Today?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Guangdong TCL Smart Home Appliances (SZSE:002668). 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 Guangdong TCL Smart Home Appliances

Guangdong TCL Smart Home Appliances' Improving Profits

In the last three years Guangdong TCL Smart Home Appliances' 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. To the delight of shareholders, Guangdong TCL Smart Home Appliances' EPS soared from CN¥0.57 to CN¥0.77, over the last year. That's a fantastic gain of 35%.

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 Guangdong TCL Smart Home Appliances remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 23% to CN¥16b. 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.

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 Guangdong TCL Smart Home Appliances.

Are Guangdong TCL Smart Home Appliances 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. Shareholders will be pleased by the fact that insiders own Guangdong TCL Smart Home Appliances shares worth a considerable sum. To be specific, they have CN¥155m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 1.5% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Guangdong TCL Smart Home Appliances Deserve A Spot On Your Watchlist?

You can't deny that Guangdong TCL Smart Home Appliances has grown its earnings per share at a very impressive rate. That's attractive. 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. We don't want to rain on the parade too much, but we did also find 1 warning sign for Guangdong TCL Smart Home Appliances that you need to be mindful of.

Although Guangdong TCL Smart Home Appliances 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.