Does Qingdao Port International (HKG:6198) Deserve A Spot On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Qingdao Port International (HKG:6198). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Qingdao Port International with the means to add long-term value to shareholders.

See our latest analysis for Qingdao Port International

How Fast Is Qingdao Port International 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. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Qingdao Port International has grown EPS by 8.9% per year. 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. Not all of Qingdao Port International's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Unfortunately, Qingdao Port International's revenue dropped 3.5% last year, but the silver lining is that EBIT margins improved from 24% to 27%. While not disastrous, these figures could be better.

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.

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

Are Qingdao Port International Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. For companies with market capitalisations between CN¥29b and CN¥86b, like Qingdao Port International, the median CEO pay is around CN¥6.7m.

The CEO of Qingdao Port International was paid just CN¥225k in total compensation for the year ending December 2022. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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 Qingdao Port International Deserve A Spot On Your Watchlist?

One positive for Qingdao Port International is that it is growing EPS. That's nice to see. To add to this, the modest CEO compensation should tell investors that the directors have an active interest in delivering the best for shareholders. So all in all Qingdao Port International is worthy at least considering for your watchlist. We don't want to rain on the parade too much, but we did also find 1 warning sign for Qingdao Port International that you need to be mindful of.

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 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.