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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Suzhou Douson Drilling & Production EquipmentLtd (SHSE:603800), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Suzhou Douson Drilling & Production EquipmentLtd

How Fast Is Suzhou Douson Drilling & Production EquipmentLtd Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Suzhou Douson Drilling & Production EquipmentLtd has achieved impressive annual EPS growth of 47%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. Not all of Suzhou Douson Drilling & Production EquipmentLtd's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Suzhou Douson Drilling & Production EquipmentLtd shareholders can take confidence from the fact that EBIT margins are up from -0.3% to 10.0%, and revenue is growing. 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. For finer detail, click on the image.

Fortunately, we've got access to analyst forecasts of Suzhou Douson Drilling & Production EquipmentLtd's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Suzhou Douson Drilling & Production EquipmentLtd 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. Suzhou Douson Drilling & Production EquipmentLtd followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have CN¥308m worth of shares. This considerable investment should help drive long-term value in the business. Those holdings account for over 5.1% of the company; visible skin in the game.

Does Suzhou Douson Drilling & Production EquipmentLtd Deserve A Spot On Your Watchlist?

Suzhou Douson Drilling & Production EquipmentLtd's earnings have taken off in quite an impressive fashion. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Suzhou Douson Drilling & Production EquipmentLtd for a spot on your watchlist. What about risks? Every company has them, and we've spotted 2 warning signs for Suzhou Douson Drilling & Production EquipmentLtd (of which 1 is concerning!) you should know about.

Although Suzhou Douson Drilling & Production EquipmentLtd certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.