Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Bank of Communications (HKG:3328). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for Bank of Communications

Bank of Communications's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Bank of Communications managed to grow EPS by 5.1% per year, over three years. While that sort of growth rate isn't amazing, it does show the business is growing.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that Bank of Communications's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Bank of Communications maintained stable EBIT margins over the last year, all while growing revenue 13% to CN¥208b. 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.

Fortunately, we've got access to analyst forecasts of Bank of Communications's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Bank of Communications Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Bank of Communications top brass are certainly in sync, not having sold any shares, over the last year. But my excitement comes from the CN¥443k that Executive Chairman Deqi Ren spent buying shares (at an average price of about CN¥4.43).

I do like that insiders have been buying shares in Bank of Communications, but there is more evidence of shareholder friendly management. I refer to the very reasonable level of CEO pay. For companies with market capitalizations over CN¥53b, like Bank of Communications, the median CEO pay is around CN¥6.9m.

The CEO of Bank of Communications only received CN¥826k in total compensation for the year ending . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Does Bank of Communications Deserve A Spot On Your Watchlist?

One positive for Bank of Communications is that it is growing EPS. That's nice to see. Like chocolate chips in vanilla ice cream, the insider buying, and modest CEO pay, make it better. The sum of all that, for me, points to a quality business, and a genuine prospect for further research. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Bank of Communications shapes up to industry peers, when it comes to ROE.

As a growth investor I do like to see insider buying. But Bank of Communications 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.