Is Now The Time To Put Jiangxi Copper (HKG:358) On Your Watchlist?

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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Jiangxi Copper (HKG:358). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Jiangxi Copper with the means to add long-term value to shareholders.

View our latest analysis for Jiangxi Copper

How Fast Is Jiangxi Copper Growing?

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. Jiangxi Copper managed to grow EPS by 14% per year, over three years. That's a pretty good rate, if the company can sustain it.

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. While we note Jiangxi Copper achieved similar EBIT margins to last year, revenue grew by a solid 7.2% to CN¥527b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Jiangxi Copper.

Are Jiangxi Copper Insiders Aligned With All Shareholders?

Since Jiangxi Copper has a market capitalisation of HK$72b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Holding CN¥534m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This would indicate that the goals of shareholders and management are one and the same.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations between CN¥28b and CN¥85b, like Jiangxi Copper, the median CEO pay is around CN¥4.6m.

The CEO of Jiangxi Copper only received CN¥1.4m in total compensation for the year ending December 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Jiangxi Copper To Your Watchlist?

One important encouraging feature of Jiangxi Copper is that it is growing profits. Earnings growth might be the main attraction for Jiangxi Copper, but the fun does not stop there. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. Before you take the next step you should know about the 2 warning signs for Jiangxi Copper (1 is potentially serious!) that we have uncovered.

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 tailored list of Hong Kong companies which have demonstrated growth backed by significant insider holdings.

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.