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. 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 Jiangsu Seagull Cooling TowerLtd (SHSE:603269). 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.

See our latest analysis for Jiangsu Seagull Cooling TowerLtd

Jiangsu Seagull Cooling TowerLtd's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Jiangsu Seagull Cooling TowerLtd's EPS has grown 19% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. Jiangsu Seagull Cooling TowerLtd maintained stable EBIT margins over the last year, all while growing revenue 10% to CN¥1.4b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since Jiangsu Seagull Cooling TowerLtd is no giant, with a market capitalisation of CN¥1.8b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Jiangsu Seagull Cooling TowerLtd Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that Jiangsu Seagull Cooling TowerLtd insiders own a significant number of shares certainly is appealing. Owning 37% of the company, insiders have plenty riding on the performance of the the share price. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have CN¥680m invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add Jiangsu Seagull Cooling TowerLtd To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Jiangsu Seagull Cooling TowerLtd's strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Before you take the next step you should know about the 2 warning signs for Jiangsu Seagull Cooling TowerLtd that we have uncovered.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Chinese companies which have demonstrated growth backed by recent insider purchases.

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.