Here's Why We Think Xinhua Winshare Publishing and Media (HKG:811) Is Well Worth Watching

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Xinhua Winshare Publishing and Media (HKG:811). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Xinhua Winshare Publishing and Media

How Fast Is Xinhua Winshare Publishing and Media 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Xinhua Winshare Publishing and Media managed to grow EPS by 11% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

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 Xinhua Winshare Publishing and Media achieved similar EBIT margins to last year, revenue grew by a solid 8.0% to CN¥12b. That's encouraging news for the company!

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.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Xinhua Winshare Publishing and Media Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. Our analysis has discovered that the median total compensation for the CEOs of companies like Xinhua Winshare Publishing and Media with market caps between CN¥7.2b and CN¥23b is about CN¥4.3m.

Xinhua Winshare Publishing and Media offered total compensation worth CN¥2.3m to its CEO in the year to December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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 a culture of integrity, in a broader sense.

Does Xinhua Winshare Publishing and Media Deserve A Spot On Your Watchlist?

As previously touched on, Xinhua Winshare Publishing and Media is a growing business, which is encouraging. Not only that, but the CEO is paid quite reasonably, which should prompt investors to feel more trusting of the board of directors. So all in all Xinhua Winshare Publishing and Media is worthy at least considering for your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Xinhua Winshare Publishing and Media , and understanding it should be part of your investment process.

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 recent insider purchases.

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.