With EPS Growth And More, Agricultural Bank of China (HKG:1288) Is Interesting

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like Agricultural Bank of China (HKG:1288). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Agricultural Bank of China

Agricultural Bank of China's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. Agricultural Bank of China boosted its trailing twelve month EPS from CN¥0.56 to CN¥0.62, in the last year. I doubt many would complain about that 12% gain.

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. Not all of Agricultural Bank of China's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note Agricultural Bank of China's EBIT margins were flat over the last year, revenue grew by a solid 9.1% to CN¥524b. That's a real positive.

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.

Fortunately, we've got access to analyst forecasts of Agricultural Bank of China's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Agricultural Bank of China Insiders Aligned With All Shareholders?

As a general rule, I think it worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. I discovered that the median total compensation for the CEOs of companies like Agricultural Bank of China, with market caps over CN¥52b, is about CN¥6.5m.

The Agricultural Bank of China CEO received total compensation of just CN¥769k in the year to . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Does Agricultural Bank of China Deserve A Spot On Your Watchlist?

One positive for Agricultural Bank of China is that it is growing EPS. That's nice to see. On top of that, my faith in the board of directors is strengthened by the fact of the reasonable CEO pay. So I do think the stock deserves further research, if not instant addition to your watchlist. Before you take the next step you should know about the 1 warning sign for Agricultural Bank of China that we have uncovered.

Although Agricultural Bank of China certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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.

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