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. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Vipshop Holdings (NYSE:VIPS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Vipshop Holdings with the means to add long-term value to shareholders.

How Fast Is Vipshop Holdings Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Vipshop Holdings' 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. Getting in to the the finer details, it important to know that the EPS growth has been helped by share buybacks, demonstrating that the business is positioned to return capital to its shareholders.

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. Not all of Vipshop Holdings' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note Vipshop Holdings achieved similar EBIT margins to last year, revenue grew by a solid 2.9% to CN¥112b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Vipshop Holdings' forecast profits?

Are Vipshop Holdings Insiders Aligned With All Shareholders?

Owing to the size of Vipshop Holdings, we wouldn't expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Notably, they have an enviable stake in the company, worth CN¥1.6b. This totals to 23% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Very encouraging.

Is Vipshop Holdings Worth Keeping An Eye On?

You can't deny that Vipshop Holdings has grown its earnings per share at a very impressive rate. That's attractive. 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. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. You still need to take note of risks, for example - Vipshop Holdings has 2 warning signs (and 1 which is concerning) we think you should know about.

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 the US 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.