Is Now The Time To Put Insigma Technology (SHSE:600797) 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Insigma Technology (SHSE:600797). 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.

Check out our latest analysis for Insigma Technology

Insigma Technology's Improving Profits

Over the last three years, Insigma Technology 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. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Insigma Technology's EPS grew from CN¥0.053 to CN¥0.099, over the previous 12 months. It's a rarity to see 87% year-on-year growth like that.

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. The previous 12 months are something that Insigma Technology will want to put behind them after seeing a drop in EBIT margin and revenue for the period. This is less than stellar for the company.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Insigma Technology 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. Shareholders will be pleased by the fact that insiders own Insigma Technology shares worth a considerable sum. As a matter of fact, their holding is valued at CN¥227m. That's a lot of money, and no small incentive to work hard. Even though that's only about 3.4% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Insigma Technology Deserve A Spot On Your Watchlist?

Insigma Technology'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 Insigma Technology for a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 3 warning signs for Insigma Technology (1 is a bit concerning!) that you need to be mindful of.

Although Insigma Technology 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.