If EPS Growth Is Important To You, Oversea-Chinese Banking (SGX:O39) Presents An Opportunity

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. 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.

See our latest analysis for Oversea-Chinese Banking

How Fast Is Oversea-Chinese Banking Growing Its Earnings Per Share?

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's easy to see why many investors focus in on EPS growth. Oversea-Chinese Banking boosted its trailing twelve month EPS from S$1.07 to S$1.19, in the last year. There's little doubt shareholders would be happy with that 11% gain.

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. It's noted that Oversea-Chinese Banking's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Oversea-Chinese Banking maintained stable EBIT margins over the last year, all while growing revenue 9.8% to S$11b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

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. Indeed, they have a considerable amount of wealth invested in it, currently valued at S$217m. While that is a lot of skin in the game, we note this holding only totals to 0.4% of the business, which is a result of the company being so large. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.

Should You Add Oversea-Chinese Banking To Your Watchlist?

As previously touched on, Oversea-Chinese Banking is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Still, you should learn about the 1 warning sign we've spotted with Oversea-Chinese Banking.

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.