With EPS Growth And More, PetroChina (HKG:857) Makes An Interesting Case

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like PetroChina (HKG:857), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide PetroChina with the means to add long-term value to shareholders.

View our latest analysis for PetroChina

How Quickly Is PetroChina Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Impressively, PetroChina has grown EPS by 17% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Our analysis has highlighted that PetroChina's revenue from operations did not account for all of their revenue last year, so our analysis of its margins might not accurately reflect the underlying business. It was a year of stability for PetroChina as both revenue and EBIT margins remained have been flat over the past year. That's not a major concern but nor does it point to the long term growth we like to see.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for PetroChina's future profits.

Are PetroChina Insiders Aligned With All Shareholders?

Owing to the size of PetroChina, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. Given insiders own a significant chunk of shares, currently valued at CN¥657m, they have plenty of motivation to push the business to succeed. This would indicate that the goals of shareholders and management are one and the same.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations over CN¥56b, like PetroChina, the median CEO pay is around CN¥6.1m.

PetroChina's CEO took home a total compensation package of CN¥1.1m in the year prior 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 remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Does PetroChina Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into PetroChina's strong EPS growth. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. The overarching message here is that PetroChina has underlying strengths that make it worth a look at. You still need to take note of risks, for example - PetroChina has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

Although PetroChina 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.