Here's Why Jiangsu Yinhe ElectronicsLtd (SZSE:002519) Has Caught The Eye Of Investors

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 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.

In contrast to all that, many investors prefer to focus on companies like Jiangsu Yinhe ElectronicsLtd (SZSE:002519), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Jiangsu Yinhe ElectronicsLtd

Jiangsu Yinhe ElectronicsLtd's Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's no surprise that some investors are more inclined to invest in profitable businesses. To the delight of shareholders, Jiangsu Yinhe ElectronicsLtd's EPS soared from CN¥0.12 to CN¥0.16, over the last year. That's a fantastic gain of 37%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that Jiangsu Yinhe ElectronicsLtd's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The good news is that Jiangsu Yinhe ElectronicsLtd is growing revenues, and EBIT margins improved by 2.8 percentage points to 11%, over the last year. That's great to see, on both counts.

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

Are Jiangsu Yinhe ElectronicsLtd 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 Jiangsu Yinhe ElectronicsLtd shares worth a considerable sum. Notably, they have an enviable stake in the company, worth CN¥812m. That equates to 15% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.

Does Jiangsu Yinhe ElectronicsLtd Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Jiangsu Yinhe ElectronicsLtd's strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Jiangsu Yinhe ElectronicsLtd's continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Even so, be aware that Jiangsu Yinhe ElectronicsLtd is showing 1 warning sign in our investment analysis , you should know about...

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 recent insider purchases.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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

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.