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. 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 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 Qingdao Citymedia Co (SHSE:600229). 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.

How Fast Is Qingdao Citymedia Co Growing Its Earnings Per Share?

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So EPS growth can certainly encourage an investor to take note of a stock. Qingdao Citymedia Co's EPS has risen over the last 12 months, growing from CN¥0.46 to CN¥0.53. That's a 14% gain; respectable growth in the broader scheme of things.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Qingdao Citymedia Co remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 8.9% to CN¥2.7b. That's a real positive.

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.

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 Qingdao Citymedia Co's balance sheet strength, before getting too excited.

Are Qingdao Citymedia Co Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalisations between CN¥2.9b and CN¥12b, like Qingdao Citymedia Co, the median CEO pay is around CN¥950k.

Qingdao Citymedia Co's CEO took home a total compensation package worth CN¥531k in the year leading up to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Qingdao Citymedia Co Deserve A Spot On Your Watchlist?

One important encouraging feature of Qingdao Citymedia Co is that it is growing profits. On top of that, our faith in the board of directors is strengthened by the fact of the reasonable CEO pay. So all in all Qingdao Citymedia Co is worthy at least considering for your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Qingdao Citymedia Co that you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.