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. 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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Jiangxi Lianchuang Opto-Electronic Science&Technologyco.Ltd (SHSE:600363). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Jiangxi Lianchuang Opto-Electronic Science&Technologyco.Ltd with the means to add long-term value to shareholders.

Jiangxi Lianchuang Opto-Electronic Science&Technologyco.Ltd's Earnings Per Share Are Growing

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 makes EPS growth an attractive quality for any company. Jiangxi Lianchuang Opto-Electronic Science&Technologyco.Ltd managed to grow EPS by 10% per year, over three years. That's a good rate of growth, if it can be sustained.

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 Jiangxi Lianchuang Opto-Electronic Science&Technologyco.Ltd's revenue last year was 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. Jiangxi Lianchuang Opto-Electronic Science&Technologyco.Ltd's EBIT margins are flat but, worryingly, its revenue is actually down. This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Jiangxi Lianchuang Opto-Electronic Science&Technologyco.Ltd's future profits.

Are Jiangxi Lianchuang Opto-Electronic Science&Technologyco.Ltd Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Jiangxi Lianchuang Opto-Electronic Science&Technologyco.Ltd insiders have a significant amount of capital invested in the stock. Given insiders own a significant chunk of shares, currently valued at CN¥529m, they have plenty of motivation to push the business to succeed. This would indicate that the goals of shareholders and management are one and the same.

Should You Add Jiangxi Lianchuang Opto-Electronic Science&Technologyco.Ltd To Your Watchlist?

As previously touched on, Jiangxi Lianchuang Opto-Electronic Science&Technologyco.Ltd is a growing business, which is encouraging. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Now, you could try to make up your mind on Jiangxi Lianchuang Opto-Electronic Science&Technologyco.Ltd by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although Jiangxi Lianchuang Opto-Electronic Science&Technologyco.Ltd certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Chinese companies that not only boast of strong growth but have also seen recent insider buying..

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.