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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Old Chang Kee (Catalist:5ML). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Old Chang Kee with the means to add long-term value to shareholders.

We've discovered 1 warning sign about Old Chang Kee. View them for free.

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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Old Chang Kee has grown EPS by 24% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. Old Chang Kee shareholders can take confidence from the fact that EBIT margins are up from 9.0% to 12%, and revenue is growing. That's great to see, on both counts.

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.

See our latest analysis for Old Chang Kee

Old Chang Kee isn't a huge company, given its market capitalisation of S$116m. That makes it extra important to check on its balance sheet strength.

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 Old Chang Kee insiders own a meaningful share of the business. To be exact, company insiders hold 77% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. In terms of absolute value, insiders have S$89m invested in the business, at the current share price. That's nothing to sneeze at!