We Ran A Stock Scan For Earnings Growth And China Development Bank Financial Leasing (HKG:1606) Passed With Ease

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.

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 Development Bank Financial Leasing (HKG:1606). 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.

Check out our latest analysis for China Development Bank Financial Leasing

China Development Bank Financial Leasing'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 EPS growth can certainly encourage an investor to take note of a stock. China Development Bank Financial Leasing boosted its trailing twelve month EPS from CN¥0.27 to CN¥0.32, in the last year. This amounts to a 21% gain; a figure that shareholders will be pleased to see.

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. It's noted that China Development Bank Financial Leasing'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 Development Bank Financial Leasing remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 16% to CN¥17b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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

Are China Development Bank Financial Leasing 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. Our analysis has discovered that the median total compensation for the CEOs of companies like China Development Bank Financial Leasing with market caps between CN¥7.1b and CN¥23b is about CN¥4.0m.

China Development Bank Financial Leasing's CEO took home a total compensation package of CN¥558k in the year prior to December 2023. First impressions seem to indicate a compensation policy that is favourable to shareholders. 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 Development Bank Financial Leasing Worth Keeping An Eye On?

One important encouraging feature of China Development Bank Financial Leasing is that it is growing profits. Not only that, but the CEO is paid quite reasonably, which should prompt investors to feel more trusting of the board of directors. So based on its merits, the stock deserves further research, if not an addition to your watchlist. Even so, be aware that China Development Bank Financial Leasing is showing 3 warning signs in our investment analysis , you should know about...

Although China Development Bank Financial Leasing 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.

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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.