Does Shanghai Runda Medical Technology (SHSE:603108) Deserve A Spot On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Shanghai Runda Medical Technology (SHSE:603108). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shanghai Runda Medical Technology with the means to add long-term value to shareholders.

Check out our latest analysis for Shanghai Runda Medical Technology

How Fast Is Shanghai Runda Medical Technology 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 means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Shanghai Runda Medical Technology has grown EPS by 15% per year. That's a good rate of growth, if it can be sustained.

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. Shanghai Runda Medical Technology reported flat revenue and EBIT margins over the last year. That's not bad, but it doesn't point to ongoing future growth, either.

The chart below shows how the company's bottom and top lines have progressed 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 Shanghai Runda Medical Technology's balance sheet strength, before getting too excited.

Are Shanghai Runda Medical Technology 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 Shanghai Runda Medical Technology insiders have a significant amount of capital invested in the stock. Notably, they have an enviable stake in the company, worth CN¥2.5b. That equates to 18% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Should You Add Shanghai Runda Medical Technology To Your Watchlist?

One positive for Shanghai Runda Medical Technology is that it is growing EPS. That's nice to see. To add an extra spark to the fire, significant insider ownership in the company is another highlight. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. What about risks? Every company has them, and we've spotted 4 warning signs for Shanghai Runda Medical Technology (of which 1 is significant!) you should know about.

Although Shanghai Runda Medical Technology certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Chinese companies that not only boast of strong growth but have also seen recent insider buying..

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.