For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Hangzhou Greatstar Industrial (SZSE:002444). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Hangzhou Greatstar Industrial with the means to add long-term value to shareholders.

See our latest analysis for Hangzhou Greatstar Industrial

How Quickly Is Hangzhou Greatstar Industrial Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Hangzhou Greatstar Industrial managed to grow EPS by 5.4% per year, over three years. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

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. Unfortunately, Hangzhou Greatstar Industrial's revenue dropped 13% last year, but the silver lining is that EBIT margins improved from 9.4% to 13%. 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. To see the actual numbers, click on the chart.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Hangzhou Greatstar Industrial's future EPS 100% free.

Are Hangzhou Greatstar Industrial 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 Hangzhou Greatstar Industrial shares worth a considerable sum. We note that their impressive stake in the company is worth CN¥1.5b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Should You Add Hangzhou Greatstar Industrial To Your Watchlist?

As previously touched on, Hangzhou Greatstar Industrial is a growing business, which is encouraging. To add an extra spark to the fire, significant insider ownership in the company is another highlight. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Still, you should learn about the 1 warning sign we've spotted with Hangzhou Greatstar Industrial.

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.