It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Shanghai Rural Commercial Bank (SHSE:601825). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shanghai Rural Commercial Bank with the means to add long-term value to shareholders.

How Fast Is Shanghai Rural Commercial Bank Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Shanghai Rural Commercial Bank grew its EPS by 9.5% per year. That's a pretty good rate, if the company can sustain it.

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. It's noted that Shanghai Rural Commercial Bank's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Shanghai Rural Commercial Bank maintained stable EBIT margins over the last year, all while growing revenue 7.3% to CN¥23b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Shanghai Rural Commercial Bank.

Are Shanghai Rural Commercial Bank Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. The median total compensation for CEOs of companies similar in size to Shanghai Rural Commercial Bank, with market caps between CN¥29b and CN¥87b, is around CN¥2.0m.

Shanghai Rural Commercial Bank's CEO took home a total compensation package worth CN¥1.1m in the year leading up to December 2022. That is actually below the median for CEO's of similarly sized companies. 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.

Should You Add Shanghai Rural Commercial Bank To Your Watchlist?

One positive for Shanghai Rural Commercial Bank is that it is growing EPS. That's nice to see. On top of that, our faith in the board of directors is strengthened by the fact of the reasonable CEO pay. So based on its merits, the stock deserves further research, if not an addition to your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Shanghai Rural Commercial Bank , and understanding it should be part of your investment process.

Although Shanghai Rural Commercial Bank certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Chinese companies that not only boast of strong growth but have also seen recent insider buying..

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.