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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Shandong Sacred Sun Power SourcesLtd (SZSE:002580), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shandong Sacred Sun Power SourcesLtd with the means to add long-term value to shareholders.

How Fast Is Shandong Sacred Sun Power SourcesLtd Growing Its Earnings Per Share?

Shandong Sacred Sun Power SourcesLtd has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Impressively, Shandong Sacred Sun Power SourcesLtd's EPS catapulted from CN¥0.21 to CN¥0.47, over the last year. It's not often a company can achieve year-on-year growth of 128%.

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. It's noted that Shandong Sacred Sun Power SourcesLtd's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The good news is that Shandong Sacred Sun Power SourcesLtd is growing revenues, and EBIT margins improved by 3.2 percentage points to 5.7%, over the last year. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

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 Shandong Sacred Sun Power SourcesLtd's balance sheet strength, before getting too excited.

Are Shandong Sacred Sun Power SourcesLtd 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. So it is good to see that Shandong Sacred Sun Power SourcesLtd insiders have a significant amount of capital invested in the stock. Indeed, they hold CN¥284m worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 9.3% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add Shandong Sacred Sun Power SourcesLtd To Your Watchlist?

Shandong Sacred Sun Power SourcesLtd's earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Shandong Sacred Sun Power SourcesLtd very closely. You still need to take note of risks, for example - Shandong Sacred Sun Power SourcesLtd has 1 warning sign we think 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 Chinese companies which have demonstrated growth backed by recent insider purchases.

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.