Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without 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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Ping An Insurance (Group) Company of China (HKG:2318). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Quickly Is Ping An Insurance (Group) Company of China Increasing Earnings Per Share?
As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, Ping An Insurance (Group) Company of China has grown EPS by 36% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
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. I note that, last year, Ping An Insurance (Group) Company of China's revenue from operations was lower than its revenue, so that could distort my analysis of its margins. The good news is that Ping An Insurance (Group) Company of China is growing revenues, and EBIT margins improved by 2.2 percentage points to 19%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Ping An Insurance (Group) Company of China EPS 100% free.
Are Ping An Insurance (Group) Company of China Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a HK$1.8t company like Ping An Insurance (Group) Company of China. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth CN¥9.1b. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!
Should You Add Ping An Insurance (Group) Company of China To Your Watchlist?
For growth investors like me, Ping An Insurance (Group) Company of China's raw rate of earnings growth is a beacon in the night. Further, the high level of insider buying impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Now, you could try to make up your mind on Ping An Insurance (Group) Company of China by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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