For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Guangshen Railway (HKG:525), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Guangshen Railway with the means to add long-term value to shareholders.

How Fast Is Guangshen Railway Growing Its Earnings Per Share?

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. Which is why EPS growth is looked upon so favourably. It's an outstanding feat for Guangshen Railway to have grown EPS from CN¥0.0026 to CN¥0.18 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.

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. It's noted that Guangshen Railway's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The music to the ears of Guangshen Railway shareholders is that EBIT margins have grown from 0.5% to 6.7% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

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 we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Guangshen Railway?

Are Guangshen Railway 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. Guangshen Railway followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. We note that their impressive stake in the company is worth CN¥931m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Is Guangshen Railway Worth Keeping An Eye On?

Guangshen Railway's earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. 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. So based on this quick analysis, we do think it's worth considering Guangshen Railway for a spot on your watchlist. It is worth noting though that we have found 1 warning sign for Guangshen Railway that you need to take into consideration.

Although Guangshen Railway 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 Hong Kong 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.