Does China Communications Construction (HKG:1800) Deserve A Spot On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 China Communications Construction (HKG:1800). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide China Communications Construction with the means to add long-term value to shareholders.

See our latest analysis for China Communications Construction

How Fast Is China Communications Construction Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. China Communications Construction's EPS has risen over the last 12 months, growing from CN¥1.13 to CN¥1.38. There's little doubt shareholders would be happy with that 21% gain.

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. While we note China Communications Construction achieved similar EBIT margins to last year, revenue grew by a solid 2.4% to CN¥746b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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

Are China Communications Construction Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. For companies with market capitalisations over CN¥58b, like China Communications Construction, the median CEO pay is around CN¥6.8m.

The China Communications Construction CEO received total compensation of just CN¥975k in the year to December 2023. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is China Communications Construction Worth Keeping An Eye On?

As previously touched on, China Communications Construction is a growing business, which is encouraging. To add to this, the modest CEO compensation should tell investors that the directors have an active interest in delivering the best for shareholders. So based on its merits, the stock deserves further research, if not an addition to your watchlist. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for China Communications Construction (1 can't be ignored) you should be aware of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in HK with promising growth potential and insider confidence.

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.