Does People's Insurance Company (Group) of China (HKG:1339) Deserve A Spot On Your Watchlist?

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. 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. 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 People's Insurance Company (Group) of China (HKG:1339). 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.

Check out our latest analysis for People's Insurance Company (Group) of China

People's Insurance Company (Group) of China'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 it's easy to see why many investors focus in on EPS growth. It's good to see that People's Insurance Company (Group) of China's EPS has grown from CN¥0.49 to CN¥0.55 over twelve months. There's little doubt shareholders would be happy with that 14% gain.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of People's Insurance Company (Group) of China's revenue last year was revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note People's Insurance Company (Group) of China achieved similar EBIT margins to last year, revenue grew by a solid 3.7% to CN¥616b. That's a real positive.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of People's Insurance Company (Group) of China's forecast profits?

Are People's Insurance Company (Group) of China Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a HK$245b company like People's Insurance Company (Group) of China. But we are reassured by the fact they have invested in the company. As a matter of fact, their holding is valued at CN¥201m. This considerable investment should help drive long-term value in the business. Even though that's only about 0.08% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to People's Insurance Company (Group) of China, with market caps over CN¥55b, is around CN¥5.8m.

People's Insurance Company (Group) of China's CEO took home a total compensation package of CN¥913k in the year prior to December 2021. 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 a culture of integrity, in a broader sense.

Should You Add People's Insurance Company (Group) of China To Your Watchlist?

One important encouraging feature of People's Insurance Company (Group) of China is that it is growing profits. The fact that EPS is growing is a genuine positive for People's Insurance Company (Group) of China, but the pleasant picture gets better than that. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. You should always think about risks though. Case in point, we've spotted 1 warning sign for People's Insurance Company (Group) of China you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.