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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Guangdong Jiaying Pharmaceutical (SZSE:002198). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Guangdong Jiaying Pharmaceutical with the means to add long-term value to shareholders.

Check out our latest analysis for Guangdong Jiaying Pharmaceutical

How Fast Is Guangdong Jiaying Pharmaceutical Growing Its Earnings Per Share?

In the last three years Guangdong Jiaying Pharmaceutical'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. Impressively, Guangdong Jiaying Pharmaceutical's EPS catapulted from CN¥0.038 to CN¥0.092, over the last year. It's a rarity to see 144% year-on-year growth like that.

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. Guangdong Jiaying Pharmaceutical maintained stable EBIT margins over the last year, all while growing revenue 6.0% to CN¥622m. That's progress.

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 Guangdong Jiaying Pharmaceutical's balance sheet strength, before getting too excited.

Are Guangdong Jiaying Pharmaceutical 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. Shareholders will be pleased by the fact that insiders own Guangdong Jiaying Pharmaceutical shares worth a considerable sum. Holding CN¥560m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. At 18% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.

Does Guangdong Jiaying Pharmaceutical Deserve A Spot On Your Watchlist?

Guangdong Jiaying Pharmaceutical's earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. 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 Guangdong Jiaying Pharmaceutical for a spot on your watchlist. One of Buffett's considerations when discussing businesses is if they are capital light or capital intensive. Generally, a company with a high return on equity is capital light, and can thus fund growth more easily. So you might want to check this graph comparing Guangdong Jiaying Pharmaceutical's ROE with industry peers (and the market at large).

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.