Should You Be Adding Jiangsu Yinhe ElectronicsLtd (SZSE:002519) To Your Watchlist Today?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Jiangsu Yinhe ElectronicsLtd (SZSE:002519). 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.

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Jiangsu Yinhe ElectronicsLtd's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Jiangsu Yinhe ElectronicsLtd's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 59%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. Our analysis has highlighted that Jiangsu Yinhe ElectronicsLtd's revenue from operations did not account for all of their revenue last year, so our analysis of its margins might not accurately reflect the underlying business. While Jiangsu Yinhe ElectronicsLtd may have maintained EBIT margins over the last year, revenue has fallen. This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

See our latest analysis for Jiangsu Yinhe ElectronicsLtd

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

Are Jiangsu Yinhe ElectronicsLtd Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Jiangsu Yinhe ElectronicsLtd shares worth a considerable sum. We note that their impressive stake in the company is worth CN¥829m. Coming in at 14% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.

Does Jiangsu Yinhe ElectronicsLtd Deserve A Spot On Your Watchlist?

Jiangsu Yinhe ElectronicsLtd's earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. 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. Based on the sum of its parts, we definitely think its worth watching Jiangsu Yinhe ElectronicsLtd very closely. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Jiangsu Yinhe ElectronicsLtd , and understanding it should be part of your investment process.

Although Jiangsu Yinhe ElectronicsLtd 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.