Does Shenzhen Yitoa Intelligent ControlLtd (SZSE:300131) 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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Shenzhen Yitoa Intelligent ControlLtd (SZSE:300131), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shenzhen Yitoa Intelligent ControlLtd with the means to add long-term value to shareholders.

See our latest analysis for Shenzhen Yitoa Intelligent ControlLtd

How Quickly Is Shenzhen Yitoa Intelligent ControlLtd Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, Shenzhen Yitoa Intelligent ControlLtd has achieved impressive annual EPS growth of 49%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Shenzhen Yitoa Intelligent ControlLtd maintained stable EBIT margins over the last year, all while growing revenue 11% to CN¥5.4b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, 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 Shenzhen Yitoa Intelligent ControlLtd's balance sheet strength, before getting too excited.

Are Shenzhen Yitoa Intelligent ControlLtd 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. Shenzhen Yitoa Intelligent ControlLtd followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Notably, they have an enviable stake in the company, worth CN¥1.2b. That equates to 13% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Is Shenzhen Yitoa Intelligent ControlLtd Worth Keeping An Eye On?

Shenzhen Yitoa Intelligent ControlLtd's earnings per share have been soaring, with growth rates sky high. 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. Based on the sum of its parts, we definitely think its worth watching Shenzhen Yitoa Intelligent ControlLtd very closely. However, before you get too excited we've discovered 2 warning signs for Shenzhen Yitoa Intelligent ControlLtd that you should be aware of.

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.