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. 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 Aerospace Intelligent Manufacturing Technology (SZSE:300446). 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.

Aerospace Intelligent Manufacturing Technology's Improving Profits

In the last three years Aerospace Intelligent Manufacturing Technology's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Aerospace Intelligent Manufacturing Technology's EPS grew from CN¥0.39 to CN¥0.65, over the previous 12 months. It's a rarity to see 67% year-on-year growth like that.

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. Aerospace Intelligent Manufacturing Technology maintained stable EBIT margins over the last year, all while growing revenue 12% to CN¥6.6b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Aerospace Intelligent Manufacturing Technology 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. So it is good to see that Aerospace Intelligent Manufacturing Technology insiders have a significant amount of capital invested in the stock. To be specific, they have CN¥109m worth of shares. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 1.0%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to 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. For companies with market capitalisations between CN¥7.2b and CN¥23b, like Aerospace Intelligent Manufacturing Technology, the median CEO pay is around CN¥1.4m.

The CEO of Aerospace Intelligent Manufacturing Technology was paid just CN¥175k in total compensation for the year ending December 2023. 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 compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Aerospace Intelligent Manufacturing Technology Deserve A Spot On Your Watchlist?

Aerospace Intelligent Manufacturing Technology's earnings per share growth have been climbing higher at an appreciable rate. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The sharp increase in earnings could signal good business momentum. Aerospace Intelligent Manufacturing Technology is certainly doing some things right and is well worth investigating. You still need to take note of risks, for example - Aerospace Intelligent Manufacturing Technology has 1 warning sign we think you should be aware of.

Although Aerospace Intelligent Manufacturing Technology 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