It’s common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’ A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
If this kind of company isn’t your style, you like companies that generate revenue, and even earn profits, then you may well be interested in MNRB Holdings Berhad (KLSE:MNRB). While profit isn’t the sole metric that should be considered when investing, it’s worth recognising businesses that can consistently produce it.
See our latest analysis for MNRB Holdings Berhad
If you believe that markets are even vaguely efficient, then over the long term you’d expect a company’s share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, MNRB Holdings Berhad has achieved impressive annual EPS growth of 41%, compound, over the last three years. While that sort of growth rate isn’t sustainable for long, it certainly catches the eye of prospective investors.
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. Our analysis has highlighted that MNRB Holdings Berhad’s revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. MNRB Holdings Berhad’s EBIT margins have actually improved by 17.2 percentage points in the last year, to reach 27%, but, on the flip side, revenue was down 3.2%. That’s not a good look.
The chart below shows how the company’s bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
While profitability drives the upside, prudent investors always check the balance sheet, too.
It’s a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own MNRB Holdings Berhad shares worth a considerable sum. With a whopping RM243m worth of shares as a group, insiders have plenty riding on the company’s success. Amounting to 14% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.
MNRB Holdings Berhad’s earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there’s a potential opportunity to be had here. So at the surface level, MNRB Holdings Berhad is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. It’s still necessary to consider the ever-present spectre of investment risk. We’ve identified 2 warning signs with MNRB Holdings Berhad (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in MY with promising growth potential and insider confidence.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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