Does CMOC Group (HKG:3993) Deserve A Spot On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like CMOC Group (HKG:3993). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide CMOC Group with the means to add long-term value to shareholders.

View our latest analysis for CMOC Group

How Fast Is CMOC Group Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that CMOC Group has grown EPS by 48% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. CMOC Group shareholders can take confidence from the fact that EBIT margins are up from 4.3% to 14%, and revenue is growing. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

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 CMOC Group's future profits.

Are CMOC Group Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a HK$163b company like CMOC Group. But we are reassured by the fact they have invested in the company. As a matter of fact, their holding is valued at CN¥100m. This considerable investment should help drive long-term value in the business. Despite being just 0.06% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add CMOC Group To Your Watchlist?

CMOC Group's earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching CMOC Group very closely. Now, you could try to make up your mind on CMOC Group by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although CMOC Group 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.