Does Atour Lifestyle Holdings (NASDAQ:ATAT) 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.' 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Atour Lifestyle Holdings (NASDAQ:ATAT). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

We check all companies for important risks. See what we found for Atour Lifestyle Holdings in our free report.

How Fast Is Atour Lifestyle Holdings Growing Its Earnings Per Share?

In the last three years Atour Lifestyle Holdings' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Atour Lifestyle Holdings' EPS grew from CN¥5.45 to CN¥9.27, over the previous 12 months. It's a rarity to see 70% year-on-year growth like that. The best case scenario? That the business has hit a true inflection point.

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 Atour Lifestyle Holdings' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The music to the ears of Atour Lifestyle Holdings shareholders is that EBIT margins have grown from 20% to 22% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Check out our latest analysis for Atour Lifestyle Holdings

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Atour Lifestyle Holdings' forecast profits?

Are Atour Lifestyle Holdings 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. Atour Lifestyle Holdings followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they have a considerable amount of wealth invested in it, currently valued at CN¥916m. That equates to 26% of the company, making insiders powerful and aligned with other shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

Should You Add Atour Lifestyle Holdings To Your Watchlist?

Atour Lifestyle Holdings' earnings have taken off in quite an impressive fashion. 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 Atour Lifestyle Holdings very closely. Now, you could try to make up your mind on Atour Lifestyle Holdings by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

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 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.