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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Shin Yang Group Berhad (KLSE:SYGROUP). 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.
Check out our latest analysis for Shin Yang Group Berhad
Shin Yang Group Berhad's Improving Profits
Shin Yang Group Berhad has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Shin Yang Group Berhad's EPS shot up from RM0.12 to RM0.16; a result that's bound to keep shareholders happy. That's a impressive gain of 33%.
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. The music to the ears of Shin Yang Group Berhad shareholders is that EBIT margins have grown from 18% to 20% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Shin Yang Group Berhad isn't a huge company, given its market capitalisation of RM687m. That makes it extra important to check on its balance sheet strength.
Are Shin Yang Group Berhad Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Shin Yang Group Berhad insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at RM122m. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 18% of the shares on issue for the business, an appreciable amount considering the market cap.