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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Sin Heng Heavy Machinery (SGX:BKA), 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 Sin Heng Heavy Machinery with the means to add long-term value to shareholders.

See our latest analysis for Sin Heng Heavy Machinery

How Fast Is Sin Heng Heavy Machinery Growing Its Earnings Per Share?

In the last three years Sin Heng Heavy Machinery'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. So it would be better to isolate the growth rate over the last year for our analysis. Sin Heng Heavy Machinery's EPS shot up from S$0.034 to S$0.046; a result that's bound to keep shareholders happy. That's a commendable gain of 35%.

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. EBIT margins for Sin Heng Heavy Machinery remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 9.4% to S$60m. 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 Sin Heng Heavy Machinery is no giant, with a market capitalisation of S$50m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Sin Heng Heavy Machinery Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Sin Heng Heavy Machinery insiders own a meaningful share of the business. In fact, they own 37% of the shares, making insiders a very influential shareholder group. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Of course, Sin Heng Heavy Machinery is a very small company, with a market cap of only S$50m. So this large proportion of shares owned by insiders only amounts to S$19m. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add Sin Heng Heavy Machinery To Your Watchlist?

You can't deny that Sin Heng Heavy Machinery 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 Sin Heng Heavy Machinery's continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Still, you should learn about the 2 warning signs we've spotted with Sin Heng Heavy Machinery.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.