The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.
In contrast to all that, many investors prefer to focus on companies like Mewah International (SGX:MV4), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
View our latest analysis for Mewah International
Mewah International's Improving Profits
In the last three years Mewah International's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Mewah International's EPS shot up from US$0.053 to US$0.076; a result that's bound to keep shareholders happy. That's a commendable gain of 42%.
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. EBIT margins for Mewah International remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 25% to US$5.4b. That's encouraging news for the company!
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 it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Mewah International's balance sheet strength, before getting too excited.
Are Mewah International Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
First things first, there weren't any reports of insiders selling shares in Mewah International in the last 12 months. But the important part is that COO, Head of Consumer Pack Segment & Executive Director Hui Hsin Cheo spent US$645k buying stock, at an average price of US$0.43. Big buys like that may signal an opportunity; actions speak louder than words.