Here's Why We Think Oversea-Chinese Banking (SGX:O39) Might Deserve Your Attention Today

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Oversea-Chinese Banking (SGX:O39). 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.

View our latest analysis for Oversea-Chinese Banking

Oversea-Chinese Banking's Earnings Per Share Are Growing

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 Oversea-Chinese Banking grew its EPS by 4.6% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Our analysis has highlighted that Oversea-Chinese Banking's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Oversea-Chinese Banking achieved similar EBIT margins to last year, revenue grew by a solid 14% to S$11b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Oversea-Chinese Banking?

Are Oversea-Chinese Banking Insiders Aligned With All Shareholders?

Since Oversea-Chinese Banking has a market capitalisation of S$56b, 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. We note that their impressive stake in the company is worth S$212m. We note that this amounts to 0.4% of the company, which may be small owing to the sheer size of Oversea-Chinese Banking but it's still worth mentioning. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.

Does Oversea-Chinese Banking Deserve A Spot On Your Watchlist?

One important encouraging feature of Oversea-Chinese Banking is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination definitely favoured by investors so consider keeping the company on a watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Oversea-Chinese Banking you should be aware of, and 1 of them is potentially serious.

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.