Here's Why We Think Sinopec Oilfield Service (HKG:1033) Is Well Worth Watching

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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Sinopec Oilfield Service (HKG:1033). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Sinopec Oilfield Service

How Fast Is Sinopec Oilfield Service Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Sinopec Oilfield Service grew its EPS by 14% per year. That's a pretty good rate, if the company can sustain it.

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. EBIT margins for Sinopec Oilfield Service remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.6% to CN¥79b. That's a real positive.

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

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

Are Sinopec Oilfield Service Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. Our analysis has discovered that the median total compensation for the CEOs of companies like Sinopec Oilfield Service with market caps between CN¥15b and CN¥46b is about CN¥5.2m.

The CEO of Sinopec Oilfield Service only received CN¥1.0m in total compensation for the year ending December 2022. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Sinopec Oilfield Service Deserve A Spot On Your Watchlist?

One positive for Sinopec Oilfield Service is that it is growing EPS. That's nice to see. On top of that, our faith in the board of directors is strengthened by the fact of the reasonable CEO pay. All things considered, Sinopec Oilfield Service is definitely worth taking a deeper dive into. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Sinopec Oilfield Service , and understanding it should be part of your investment process.

The beauty of investing is that you can invest in almost 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.

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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.