Should You Be Adding C&D International Investment Group (HKG:1908) To Your Watchlist Today?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like C&D International Investment Group (HKG:1908), which has not only revenues, but also profits. 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.

View our latest analysis for C&D International Investment Group

How Quickly Is C&D International Investment Group Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years C&D International Investment Group grew its EPS by 5.2% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

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 C&D International Investment Group achieved similar EBIT margins to last year, revenue grew by a solid 25% to CN¥62b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check C&D International Investment Group's balance sheet strength, before getting too excited.

Are C&D International Investment Group Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

First and foremost; there we saw no insiders sell C&D International Investment Group shares in the last year. But the really good news is that Executive Director Meitan Tian spent CN¥2.7m buying stock, at an average price of around CN¥13.47. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.

It's commendable to see that insiders have been buying shares in C&D International Investment Group, but there is more evidence of shareholder friendly management. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalisations between CN¥14b and CN¥45b, like C&D International Investment Group, the median CEO pay is around CN¥4.5m.

The C&D International Investment Group CEO received total compensation of just CN¥2.2m in the year to December 2021. First impressions seem to indicate a compensation policy that is favourable to 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.

Is C&D International Investment Group Worth Keeping An Eye On?

As previously touched on, C&D International Investment Group is a growing business, which is encouraging. And there's more to love too, with modest CEO remuneration and insider buying interest continuing the positives for the company. All things considered, C&D International Investment Group is certainly displaying its merits and is worthy of taking research to the next step. It is worth noting though that we have found 2 warning signs for C&D International Investment Group (1 makes us a bit uncomfortable!) that you need to take into consideration.

Keen growth investors love to see insider buying. Thankfully, C&D International Investment Group isn't the only one. You can see a 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.