The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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 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 China State Construction International Holdings (HKG:3311). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide China State Construction International Holdings with the means to add long-term value to shareholders.

How Quickly Is China State Construction International Holdings Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, China State Construction International Holdings has grown EPS by 14% per year. That's a pretty good rate, if the company can sustain it.

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 China State Construction International Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 17% to HK$120b. 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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for China State Construction International Holdings' future EPS 100% free.

Are China State Construction International Holdings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But more importantly, Executive Chairman Haipeng Zhang spent HK$403k acquiring shares, doing so at an average price of HK$8.07. Strong buying like that could be a sign of opportunity.

It's reassuring that China State Construction International Holdings insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalisations between HK$31b and HK$93b, like China State Construction International Holdings, the median CEO pay is around HK$5.0m.

China State Construction International Holdings offered total compensation worth HK$3.7m to its CEO in the year to December 2023. That is actually below the median for CEO's of similarly sized companies. 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 good governance, more generally.

Does China State Construction International Holdings Deserve A Spot On Your Watchlist?

One important encouraging feature of China State Construction International Holdings is that it is growing profits. And that's not all. We've also seen insiders buying stock, and noted modest executive pay. All things considered, China State Construction International Holdings is certainly displaying its merits and is worthy of taking research to the next step. What about risks? Every company has them, and we've spotted 2 warning signs for China State Construction International Holdings (of which 1 is potentially serious!) you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of China State Construction International Holdings, you'll probably love this curated collection of companies in HK that have an attractive valuation alongside 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.