Is Now The Time To Put Shenzhen Yitoa Intelligent ControlLtd (SZSE:300131) On Your Watchlist?

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

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. 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.

View our latest analysis for Shenzhen Yitoa Intelligent ControlLtd

Shenzhen Yitoa Intelligent ControlLtd's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Recognition must be given to the that Shenzhen Yitoa Intelligent ControlLtd has grown EPS by 49% per year, 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.

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. While we note Shenzhen Yitoa Intelligent ControlLtd achieved similar EBIT margins to last year, revenue grew by a solid 11% to CN¥5.4b. That's a real positive.

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.

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. So it is good to see that Shenzhen Yitoa Intelligent ControlLtd insiders have a significant amount of capital invested in the stock. We note that their impressive stake in the company is worth CN¥1.2b. Coming in at 13% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

Does Shenzhen Yitoa Intelligent ControlLtd Deserve A Spot On Your Watchlist?

Shenzhen Yitoa Intelligent ControlLtd's earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Shenzhen Yitoa Intelligent ControlLtd for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Shenzhen Yitoa Intelligent ControlLtd you should be aware of, and 1 of them is significant.

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.