Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like COSCO SHIPPING Development (HKG:2866). While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. 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.

Check out our latest analysis for COSCO SHIPPING Development

COSCO SHIPPING Development'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. I, for one, am blown away by the fact that COSCO SHIPPING Development has grown EPS by 52% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

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. Not all of COSCO SHIPPING Development's revenue last year was revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While COSCO SHIPPING Development may have maintained EBIT margins over the last year, revenue has fallen. Suffice it to say that is not a great sign of growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are COSCO SHIPPING Development Insiders Aligned With All Shareholders?

I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. For companies with market capitalizations between CN¥14b and CN¥45b, like COSCO SHIPPING Development, the median CEO pay is around CN¥3.9m.

The COSCO SHIPPING Development CEO received CN¥2.6m in compensation for the year ending December 2018. That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add COSCO SHIPPING Development To Your Watchlist?

COSCO SHIPPING Development's earnings have taken off like any random crypto-currency did, back in 2017. With rocketing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. Meanwhile, the very reasonable CEO pay reassures me a little, since it points to an absence profligacy. While I couldn't be sure without a deeper dive, it does seem that COSCO SHIPPING Development has the hallmarks of a quality business; and that would make it well worth watching. Of course, just because COSCO SHIPPING Development is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Although COSCO SHIPPING Development certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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