China CITIC Bank (HKG:998) Ticks All The Boxes When It Comes To Earnings Growth

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like China CITIC Bank (HKG:998). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for China CITIC Bank

China CITIC Bank's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, China CITIC Bank has grown EPS by 6.7% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. It's noted that China CITIC Bank's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for China CITIC Bank remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 13% to CN¥137b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for China CITIC Bank's future profits.

Are China CITIC Bank Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Any way you look at it China CITIC Bank shareholders can gain quiet confidence from the fact that insiders shelled out CN¥3.4m to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. We also note that it was the Executive VP & Executive Director, Cheng Liu, who made the biggest single acquisition, paying HK$1.5m for shares at about HK$3.29 each.

Does China CITIC Bank Deserve A Spot On Your Watchlist?

One positive for China CITIC Bank is that it is growing EPS. That's nice to see. Not every business can grow its EPS, but China CITIC Bank certainly can. The real kicker is that insiders have been accumulating, suggesting that those who understand the company best see some potential. Still, you should learn about the 2 warning signs we've spotted with China CITIC Bank (including 1 which doesn't sit too well with us).

Keen growth investors love to see insider buying. Thankfully, China CITIC Bank isn't the only one. You can see a a free list of them here.

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.