The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Anhui Anfu Battery TechnologyLtd (SHSE:603031). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Anhui Anfu Battery TechnologyLtd with the means to add long-term value to shareholders.

How Fast Is Anhui Anfu Battery TechnologyLtd Growing Its Earnings Per Share?

Over the last three years, Anhui Anfu Battery TechnologyLtd 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. Anhui Anfu Battery TechnologyLtd's EPS has risen over the last 12 months, growing from CN¥0.57 to CN¥0.64. That's a 14% gain; respectable growth in the broader scheme of things.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Anhui Anfu Battery TechnologyLtd remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 24% to CN¥4.5b. That's progress.

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 Anhui Anfu Battery TechnologyLtd's balance sheet strength, before getting too excited.

Are Anhui Anfu Battery 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. Anhui Anfu Battery TechnologyLtd followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Notably, they have an enviable stake in the company, worth CN¥945m. That equates to 20% of the company, making insiders powerful and aligned with other shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

Does Anhui Anfu Battery TechnologyLtd Deserve A Spot On Your Watchlist?

As previously touched on, Anhui Anfu Battery TechnologyLtd 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 2 warning signs we've spotted with Anhui Anfu Battery TechnologyLtd.

Although Anhui Anfu Battery TechnologyLtd certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Chinese companies that not only boast of strong growth but have strong insider backing.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com