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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like CAM Resources Berhad (KLSE:CAMRES). 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 CAM Resources Berhad
CAM Resources Berhad's Improving Profits
In the last three years CAM Resources Berhad'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. CAM Resources Berhad's EPS skyrocketed from RM0.052 to RM0.086, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 66%.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for CAM Resources Berhad remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 24% to RM496m. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Since CAM Resources Berhad is no giant, with a market capitalisation of RM75m, you should definitely check its cash and debt before getting too excited about its prospects.
Are CAM Resources 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 we're pleased to report that CAM Resources Berhad insiders own a meaningful share of the business. In fact, they own 58% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Valued at only RM75m CAM Resources Berhad is really small for a listed company. That means insiders only have RM43m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!