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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
In contrast to all that, many investors prefer to focus on companies like Sin Heng Heavy Machinery (SGX:BKA), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for Sin Heng Heavy Machinery
How Fast Is Sin Heng Heavy Machinery Growing Its Earnings Per Share?
Over the last three years, Sin Heng Heavy Machinery has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Sin Heng Heavy Machinery's EPS shot from S$0.032 to S$0.074, over the last year. It's not often a company can achieve year-on-year growth of 128%. That could be a sign that the business has reached a true inflection point.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Sin Heng Heavy Machinery is growing revenues, and EBIT margins improved by 4.9 percentage points to 11%, over the last year. That's great to see, on both counts.
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.
Sin Heng Heavy Machinery isn't a huge company, given its market capitalisation of S$56m. That makes it extra important to check on its balance sheet strength.
Are Sin Heng Heavy Machinery 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 Sin Heng Heavy Machinery insiders own a meaningful share of the business. Owning 40% of the company, insiders have plenty riding on the performance of the the share price. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. With that sort of holding, insiders have about S$22m riding on the stock, at current prices. So there's plenty there to keep them focused!