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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Tonghua Golden-Horse Pharmaceutical Industry CoLtd (SZSE:000766). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Tonghua Golden-Horse Pharmaceutical Industry CoLtd with the means to add long-term value to shareholders.

How Fast Is Tonghua Golden-Horse Pharmaceutical Industry CoLtd Growing Its Earnings Per Share?

In the last three years Tonghua Golden-Horse Pharmaceutical Industry CoLtd's 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. As a result, we'll zoom in on growth over the last year, instead. Tonghua Golden-Horse Pharmaceutical Industry CoLtd's EPS shot up from CN¥0.033 to CN¥0.047; a result that's bound to keep shareholders happy. That's a impressive gain of 42%.

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. Tonghua Golden-Horse Pharmaceutical Industry CoLtd's EBIT margins have actually improved by 2.5 percentage points in the last year, to reach 11%, but, on the flip side, revenue was down 7.4%. While not disastrous, these figures could be better.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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

Are Tonghua Golden-Horse Pharmaceutical Industry CoLtd Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own Tonghua Golden-Horse Pharmaceutical Industry CoLtd shares worth a considerable sum. We note that their impressive stake in the company is worth CN¥3.4b. That equates to 27% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Is Tonghua Golden-Horse Pharmaceutical Industry CoLtd Worth Keeping An Eye On?

For growth investors, Tonghua Golden-Horse Pharmaceutical Industry CoLtd's raw rate of earnings growth is a beacon in the night. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Still, you should learn about the 1 warning sign we've spotted with Tonghua Golden-Horse Pharmaceutical Industry CoLtd.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in CN with promising growth potential and insider confidence.

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.