Should You Be Adding Shaanxi Lighte Optoelectronics MaterialLtd (SHSE:688150) 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. 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. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Shaanxi Lighte Optoelectronics MaterialLtd (SHSE:688150). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shaanxi Lighte Optoelectronics MaterialLtd with the means to add long-term value to shareholders.

Check out our latest analysis for Shaanxi Lighte Optoelectronics MaterialLtd

How Quickly Is Shaanxi Lighte Optoelectronics MaterialLtd 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, Shaanxi Lighte Optoelectronics MaterialLtd has grown EPS by 11% per year. That growth rate is fairly good, assuming the company can keep it up.

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. Not all of Shaanxi Lighte Optoelectronics MaterialLtd's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Shaanxi Lighte Optoelectronics MaterialLtd shareholders can take confidence from the fact that EBIT margins are up from 15% to 33%, and revenue is growing. Both of which are great metrics to check off for potential growth.

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.

Fortunately, we've got access to analyst forecasts of Shaanxi Lighte Optoelectronics MaterialLtd's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Shaanxi Lighte Optoelectronics MaterialLtd Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Shaanxi Lighte Optoelectronics MaterialLtd insiders own a significant number of shares certainly is appealing. Owning 50% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. at the current share price. That level of investment from insiders is nothing to sneeze at.

Does Shaanxi Lighte Optoelectronics MaterialLtd Deserve A Spot On Your Watchlist?

One positive for Shaanxi Lighte Optoelectronics MaterialLtd 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. The combination definitely favoured by investors so consider keeping the company on a watchlist. One of Buffett's considerations when discussing businesses is if they are capital light or capital intensive. Generally, a company with a high return on equity is capital light, and can thus fund growth more easily. So you might want to check this graph comparing Shaanxi Lighte Optoelectronics MaterialLtd's ROE with industry peers (and the market at large).

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Chinese companies which have demonstrated growth backed by significant insider holdings.

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.