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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like PBA Holdings Bhd (KLSE:PBA). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide PBA Holdings Bhd with the means to add long-term value to shareholders.
View our latest analysis for PBA Holdings Bhd
How Quickly Is PBA Holdings Bhd Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, PBA Holdings Bhd has achieved impressive annual EPS growth of 58%, 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.
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. PBA Holdings Bhd shareholders can take confidence from the fact that EBIT margins are up from 12% to 27%, and revenue is growing. Both of which are great metrics to check off for potential growth.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
PBA Holdings Bhd isn't a huge company, given its market capitalisation of RM814m. That makes it extra important to check on its balance sheet strength.
Are PBA Holdings Bhd Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own PBA Holdings Bhd shares worth a considerable sum. To be specific, they have RM54m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 6.7% of the company; visible skin in the game.