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.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Power Root Berhad (KLSE:PWROOT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Power Root Berhad with the means to add long-term value to shareholders.
See our latest analysis for Power Root Berhad
How Fast Is Power Root Berhad Growing Its Earnings Per Share?
Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. In impressive fashion, Power Root Berhad's EPS grew from RM0.062 to RM0.13, over the previous 12 months. Year on year growth of 117% is certainly a sight to behold. 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. Power Root Berhad shareholders can take confidence from the fact that EBIT margins are up from 8.9% to 15%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Power Root Berhad's future profits.
Are Power Root Berhad Insiders Aligned With All Shareholders?
Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Power Root Berhad insiders own a meaningful share of the business. In fact, they own 51% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. 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. To give you an idea, the value of insiders' holdings in the business are valued at RM479m at the current share price. That's nothing to sneeze at!