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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 GFM Services Berhad (KLSE:GFM). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for GFM Services Berhad
How Fast Is GFM Services Berhad Growing Its Earnings Per Share?
Over the last three years, GFM Services Berhad 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. GFM Services Berhad boosted its trailing twelve month EPS from RM0.027 to RM0.032, in the last year. That's a 18% gain; respectable growth in the broader scheme of things.
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 music to the ears of GFM Services Berhad shareholders is that EBIT margins have grown from 33% to 36% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Since GFM Services Berhad is no giant, with a market capitalisation of RM169m, you should definitely check its cash and debt before getting too excited about its prospects.
Are GFM Services Berhad 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 as you can imagine, the fact that GFM Services Berhad insiders own a significant number of shares certainly is appealing. In fact, they own 49% of the shares, making insiders a very influential shareholder group. 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 RM82m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!