I Built A List Of Growing Companies And China CITIC Bank (HKG:998) Made The Cut

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In contrast to all that, I prefer to spend time on companies like China CITIC Bank (HKG:998), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.

View our latest analysis for China CITIC Bank

How Quickly Is China CITIC Bank Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. Over the last three years, China CITIC Bank has grown EPS by 5.0% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. I note that China CITIC Bank's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note China CITIC Bank's EBIT margins were flat over the last year, revenue grew by a solid 11% to CN¥118b. That's progress.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of China CITIC Bank's forecast profits?

Are China CITIC Bank Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.

Any way you look at it China CITIC Bank shareholders can gain quiet confidence from the fact that insiders shelled out CN¥5.7m to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. It is also worth noting that it was Vice Chairman Heying Fang who made the biggest single purchase, worth HK$1.8m, paying HK$3.38 per share.

The good news, alongside the insider buying, for China CITIC Bank bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have CN¥147m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.06% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Heying Fang, is paid less than the median for similar sized companies. For companies with market capitalizations over CN¥52b, like China CITIC Bank, the median CEO pay is around CN¥6.5m.

The China CITIC Bank CEO received total compensation of just CN¥2.4m 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 a culture of integrity, in a broader sense.

Is China CITIC Bank Worth Keeping An Eye On?

As I already mentioned, China CITIC Bank is a growing business, which is what I like to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist - and arguably a research priority. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with China CITIC Bank , and understanding it should be part of your investment process.

As a growth investor I do like to see insider buying. But 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.
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