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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Astro-century Education&TechnologyLtd (SZSE:300654). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Astro-century Education&TechnologyLtd with the means to add long-term value to shareholders.

Astro-century Education&TechnologyLtd's Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's easy to see why many investors focus in on EPS growth. It's good to see that Astro-century Education&TechnologyLtd's EPS has grown from CN¥0.10 to CN¥0.12 over twelve months. This amounts to a 16% gain; a figure that shareholders will be pleased to see.

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. Astro-century Education&TechnologyLtd maintained stable EBIT margins over the last year, all while growing revenue 17% to CN¥507m. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. 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 Astro-century Education&TechnologyLtd's balance sheet strength, before getting too excited.

Are Astro-century Education&TechnologyLtd 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. Shareholders will be pleased by the fact that insiders own Astro-century Education&TechnologyLtd shares worth a considerable sum. As a matter of fact, their holding is valued at CN¥333m. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 9.3% of the company, demonstrating a degree of high-level alignment with shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Astro-century Education&TechnologyLtd, with market caps between CN¥1.4b and CN¥5.8b, is around CN¥837k.

The CEO of Astro-century Education&TechnologyLtd was paid just CN¥303k in total compensation for the year ending December 2022. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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.

Does Astro-century Education&TechnologyLtd Deserve A Spot On Your Watchlist?

One positive for Astro-century Education&TechnologyLtd is that it is growing EPS. That's nice to see. The growth of EPS may be the eye-catching headline for Astro-century Education&TechnologyLtd, but there's more to bring joy for shareholders. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. What about risks? Every company has them, and we've spotted 1 warning sign for Astro-century Education&TechnologyLtd you should know about.

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.