Is Now The Time To Put Vipshop Holdings (NYSE:VIPS) 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. 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. 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 Vipshop Holdings (NYSE:VIPS). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Vipshop Holdings

Vipshop Holdings' Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Vipshop Holdings' EPS has grown 19% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. It's noted that Vipshop Holdings' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Vipshop Holdings achieved similar EBIT margins to last year, revenue grew by a solid 2.9% to CN¥112b. That's a real positive.

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.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Vipshop Holdings' future profits.

Are Vipshop Holdings Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$9.3b company like Vipshop Holdings. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth CN¥2.2b. Coming in at 23% 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.

Should You Add Vipshop Holdings To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Vipshop Holdings' strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. However, before you get too excited we've discovered 2 warning signs for Vipshop Holdings (1 makes us a bit uncomfortable!) 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 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.