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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 New Trend International Logis-TechLtd (SZSE:300532). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

How Fast Is New Trend International Logis-TechLtd Growing Its Earnings Per Share?

Over the last three years, New Trend International Logis-TechLtd has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. New Trend International Logis-TechLtd's EPS skyrocketed from CN¥0.99 to CN¥1.27, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 29%.

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. While we note New Trend International Logis-TechLtd achieved similar EBIT margins to last year, revenue grew by a solid 19% to CN¥3.1b. 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 New Trend International Logis-TechLtd's balance sheet strength, before getting too excited.

Are New Trend International Logis-TechLtd Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that New Trend International Logis-TechLtd insiders own a significant number of shares certainly is appealing. Owning 42% of the company, insiders have plenty riding on the performance of the the share price. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. This insider holding amounts to That means they have plenty of their own capital riding on the performance of the business!

Does New Trend International Logis-TechLtd Deserve A Spot On Your Watchlist?

You can't deny that New Trend International Logis-TechLtd has grown its earnings per share at a very impressive rate. That's attractive. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for New Trend International Logis-TechLtd that 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.