For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like UMS Holdings Berhad (KLSE:UMS), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for UMS Holdings Berhad
How Fast Is UMS Holdings Berhad Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Impressively, UMS Holdings Berhad has grown EPS by 29% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for UMS Holdings Berhad remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.1% to RM73m. That's a real positive.
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.
UMS Holdings Berhad isn't a huge company, given its market capitalisation of RM77m. That makes it extra important to check on its balance sheet strength.
Are UMS Holdings Berhad Insiders Aligned With All Shareholders?
Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that UMS Holdings Berhad insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 58%, company insiders are in control and have plenty of capital behind the venture. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Of course, UMS Holdings Berhad is a very small company, with a market cap of only RM77m. So despite a large proportional holding, insiders only have RM45m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!