Here's Why I Think People's Insurance Company (Group) of China (HKG:1339) Is An Interesting Stock

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like People's Insurance Company (Group) of China (HKG:1339). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

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

People's Insurance Company (Group) of China'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. That makes EPS growth an attractive quality for any company. We can see that in the last three years People's Insurance Company (Group) of China grew its EPS by 17% per year. That's a good rate of growth, if it can be sustained.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that People's Insurance Company (Group) of China's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. People's Insurance Company (Group) of China maintained stable EBIT margins over the last year, all while growing revenue 2.3% to CN¥594b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. 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 People's Insurance Company (Group) of China's future profits.

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

Since People's Insurance Company (Group) of China has a market capitalization of HK$224b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. To be specific, they have CN¥294m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.1% 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 I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations over CN¥51b, like People's Insurance Company (Group) of China, the median CEO pay is around CN¥7.0m.

The People's Insurance Company (Group) of China CEO received total compensation of only CN¥34k in the year to . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. 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. I'd also argue reasonable pay levels attest to good decision making more generally.

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

One positive for People's Insurance Company (Group) of China is that it is growing EPS. That's nice to see. Earnings growth might be the main game for People's Insurance Company (Group) of China, but the fun does not stop there. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. Even so, be aware that People's Insurance Company (Group) of China is showing 1 warning sign in our investment analysis , you should know about...

Although People's Insurance Company (Group) of China certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.