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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 JDM JingDaMachine (Ningbo)Ltd (SHSE:603088). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

How Quickly Is JDM JingDaMachine (Ningbo)Ltd 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. It certainly is nice to see that JDM JingDaMachine (Ningbo)Ltd has managed to grow EPS by 30% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It's noted that, last year, JDM JingDaMachine (Ningbo)Ltd's revenue from operations was lower than its revenue, so that could distort our analysis of its margins. While we note JDM JingDaMachine (Ningbo)Ltd achieved similar EBIT margins to last year, revenue grew by a solid 11% to CN¥689m. That's progress.

The chart below shows how the company's bottom and top lines have progressed 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 JDM JingDaMachine (Ningbo)Ltd's balance sheet strength, before getting too excited.

Are JDM JingDaMachine (Ningbo)Ltd Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. JDM JingDaMachine (Ningbo)Ltd followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they hold CN¥324m worth of its stock. This considerable investment should help drive long-term value in the business. Those holdings account for over 9.8% of the company; visible skin in the game.

Does JDM JingDaMachine (Ningbo)Ltd Deserve A Spot On Your Watchlist?

You can't deny that JDM JingDaMachine (Ningbo)Ltd has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in JDM JingDaMachine (Ningbo)Ltd's continuing strength. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. You still need to take note of risks, for example - JDM JingDaMachine (Ningbo)Ltd has 1 warning sign we think you should be aware of.

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.