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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In contrast to all that, I prefer to spend time on companies like Weichai Power (HKG:2338), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
View our latest analysis for Weichai Power
Weichai Power's Improving Profits
In the last three years Weichai Power's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. It's good to see that Weichai Power's EPS have grown from CN¥0.94 to CN¥1.17 over twelve months. I doubt many would complain about that 25% gain.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Weichai Power's EBIT margins were flat over the last year, revenue grew by a solid 6.1% to CN¥165b. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Weichai Power?
Are Weichai Power Insiders Aligned With All Shareholders?
Since Weichai Power has a market capitalization of CN¥105b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth CN¥1.5b. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations over CN¥55b, like Weichai Power, the median CEO pay is around CN¥4.1m.