Here's Why We Think Weihai Bank (HKG:9677) Is Well Worth Watching

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Weihai Bank (HKG:9677). 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.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Weihai Bank's Improving Profits

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's easy to see why many investors focus in on EPS growth. Weihai Bank has grown its trailing twelve month EPS from CN¥0.29 to CN¥0.31, in the last year. That amounts to a small improvement of 4.8%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of Weihai Bank's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Weihai Bank remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 9.3% to CN¥4.9b. That's encouraging news for the company!

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.

See our latest analysis for Weihai Bank

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Weihai Bank Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. The median total compensation for CEOs of companies similar in size to Weihai Bank, with market caps between CN¥7.1b and CN¥23b, is around CN¥3.3m.

Weihai Bank offered total compensation worth CN¥1.7m to its CEO in the year to December 2024. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Weihai Bank To Your Watchlist?

One important encouraging feature of Weihai Bank 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. All things considered, Weihai Bank is definitely worth taking a deeper dive into. You still need to take note of risks, for example - Weihai Bank has 1 warning sign we think you should be aware of.

Although Weihai Bank certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Hong Kong companies that not only boast of strong growth but have strong insider backing.

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.