Here's Why I Think Sinotruk (Hong Kong) (HKG:3808) Is An Interesting Stock

By
Simply Wall St
Published
October 25, 2021
SEHK:3808
Source: Shutterstock

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

So if you're like me, you might be more interested in profitable, growing companies, like Sinotruk (Hong Kong) (HKG:3808). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Sinotruk (Hong Kong)

Sinotruk (Hong Kong)'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 share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that Sinotruk (Hong Kong) has managed to grow EPS by 23% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Sinotruk (Hong Kong) maintained stable EBIT margins over the last year, all while growing revenue 70% to CN¥121b. That's a real positive.

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.

earnings-and-revenue-history
SEHK:3808 Earnings and Revenue History October 25th 2021

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

Are Sinotruk (Hong Kong) Insiders Aligned With All Shareholders?

I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. I discovered that the median total compensation for the CEOs of companies like Sinotruk (Hong Kong) with market caps between CN¥13b and CN¥41b is about CN¥4.4m.

The Sinotruk (Hong Kong) CEO received total compensation of just CN¥1.8m 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. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.

Is Sinotruk (Hong Kong) Worth Keeping An Eye On?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Sinotruk (Hong Kong)'s strong EPS growth. With swiftly growing earnings, it probably has its best days ahead, and the modest CEO pay suggests the company is careful with cash. So I'd argue this is the kind of stock worth watching, even if it isn't great value today. You still need to take note of risks, for example - Sinotruk (Hong Kong) has 3 warning signs (and 1 which is significant) we think you should know about.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.