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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.
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 DKLS Industries Berhad (KLSE:DKLS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide DKLS Industries Berhad with the means to add long-term value to shareholders.
Check out our latest analysis for DKLS Industries Berhad
DKLS Industries Berhad's Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, DKLS Industries Berhad has grown EPS by 24% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
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. Not all of DKLS Industries Berhad's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. The good news is that DKLS Industries Berhad is growing revenues, and EBIT margins improved by 3.1 percentage points to 20%, over the last year. Both of which are great metrics to check off for potential growth.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Since DKLS Industries Berhad is no giant, with a market capitalisation of RM176m, you should definitely check its cash and debt before getting too excited about its prospects.
Are DKLS Industries Berhad Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in DKLS Industries Berhad will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Indeed, with a collective holding of 88%, company insiders are in control and have plenty of capital behind the venture. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have RM155m invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!