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.

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 L&K Engineering (Suzhou)Ltd (SHSE:603929). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide L&K Engineering (Suzhou)Ltd with the means to add long-term value to shareholders.

L&K Engineering (Suzhou)Ltd's Improving Profits

L&K Engineering (Suzhou)Ltd has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. L&K Engineering (Suzhou)Ltd's EPS skyrocketed from CN¥1.47 to CN¥2.33, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 58%.

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 L&K Engineering (Suzhou)Ltd remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 91% to CN¥5.8b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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

Are L&K Engineering (Suzhou)Ltd 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 L&K Engineering (Suzhou)Ltd insiders have a significant amount of capital invested in the stock. With a whopping CN¥508m worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 9.1% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.

Does L&K Engineering (Suzhou)Ltd Deserve A Spot On Your Watchlist?

You can't deny that L&K Engineering (Suzhou)Ltd has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in L&K Engineering (Suzhou)Ltd's continuing strength. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with L&K Engineering (Suzhou)Ltd , and understanding it should be part of your investment process.

Although L&K Engineering (Suzhou)Ltd 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.