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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Mesiniaga Berhad (KLSE:MSNIAGA). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Mesiniaga Berhad with the means to add long-term value to shareholders.
Check out our latest analysis for Mesiniaga Berhad
Mesiniaga Berhad'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 you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Mesiniaga Berhad has grown EPS by 34% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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. Mesiniaga Berhad maintained stable EBIT margins over the last year, all while growing revenue 22% to RM293m. 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. To see the actual numbers, click on the chart.
Mesiniaga Berhad isn't a huge company, given its market capitalisation of RM79m. That makes it extra important to check on its balance sheet strength.
Are Mesiniaga Berhad Insiders Aligned With All Shareholders?
Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So those who are interested in Mesiniaga Berhad will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 51% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Although, with Mesiniaga Berhad being valued at RM79m, this is a small company we're talking about. So this large proportion of shares owned by insiders only amounts to RM40m. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.