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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

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 Ningxia Western Venture IndustrialLtd (SZSE:000557). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Ningxia Western Venture IndustrialLtd with the means to add long-term value to shareholders.

How Quickly Is Ningxia Western Venture IndustrialLtd Increasing Earnings Per Share?

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. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Ningxia Western Venture IndustrialLtd grew its EPS by 5.7% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

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. We note that while EBIT margins have improved from 14% to 18%, the company has actually reported a fall in revenue by 18%. While not disastrous, these figures could be better.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

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 Ningxia Western Venture IndustrialLtd's balance sheet strength, before getting too excited.

Are Ningxia Western Venture IndustrialLtd Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. The median total compensation for CEOs of companies similar in size to Ningxia Western Venture IndustrialLtd, with market caps between CN¥2.9b and CN¥12b, is around CN¥965k.

Ningxia Western Venture IndustrialLtd's CEO only received compensation totalling CN¥410k in the year to December 2023. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Ningxia Western Venture IndustrialLtd To Your Watchlist?

One important encouraging feature of Ningxia Western Venture IndustrialLtd is that it is growing profits. On top of that, our faith in the board of directors is strengthened by the fact of the reasonable CEO pay. All things considered, Ningxia Western Venture IndustrialLtd is definitely worth taking a deeper dive into. Of course, just because Ningxia Western Venture IndustrialLtd is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

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.