Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

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 completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Greenland Hong Kong Holdings (HKG:337). While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Greenland Hong Kong Holdings

Greenland Hong Kong Holdings's Improving Profits

In the last three years Greenland Hong Kong Holdings's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like a falcon taking flight, Greenland Hong Kong Holdings's EPS soared from CN¥0.46 to CN¥0.61, over the last year. That's a impressive gain of 33%.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Greenland Hong Kong Holdings's EBIT margins were flat over the last year, revenue grew by a solid 5.6% to CN¥15b. That's progress.

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 it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Greenland Hong Kong Holdings's balance sheet strength, before getting too excited.

Are Greenland Hong Kong Holdings Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

One gleaming positive for Greenland Hong Kong Holdings, in the last year, is that a certain insider has buying shares with ample enthusiasm. Specifically, in one large transaction Founder Weixian Wang paid HK$5.9m, for stock at HK$2.94 per share. Big insider buys like that are almost as rare as an ocean free of single use plastic waste.