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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Ningbo CixingLtd (SZSE:300307). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

How Fast Is Ningbo CixingLtd Growing Its Earnings Per Share?

In the last three years Ningbo CixingLtd'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. As a result, we'll zoom in on growth over the last year, instead. Impressively, Ningbo CixingLtd's EPS catapulted from CN¥0.16 to CN¥0.39, over the last year. It's a rarity to see 142% year-on-year growth like that.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that Ningbo CixingLtd's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While revenue is looking a bit flat, the good news is EBIT margins improved by 2.7 percentage points to 7.8%, in the last twelve months. Which is a great look for the company.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

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

Are Ningbo CixingLtd 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 Ningbo CixingLtd insiders have a significant amount of capital invested in the stock. Given insiders own a significant chunk of shares, currently valued at CN¥683m, they have plenty of motivation to push the business to succeed. That holding amounts to 10% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.

Should You Add Ningbo CixingLtd To Your Watchlist?

Ningbo CixingLtd's earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Ningbo CixingLtd very closely. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Ningbo CixingLtd 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.