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. 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 Tex Cycle Technology (M) Berhad (KLSE:TEXCYCL). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Tex Cycle Technology (M) Berhad

Tex Cycle Technology (M) Berhad's Improving Profits

In the last three years Tex Cycle Technology (M) Berhad's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Tex Cycle Technology (M) Berhad's EPS grew from RM0.027 to RM0.048, over the previous 12 months. It's a rarity to see 78% year-on-year growth like that.

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. While revenue is looking a bit flat, the good news is EBIT margins improved by 9.7 percentage points to 35%, in the last twelve months. Which is a great look for the company.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Tex Cycle Technology (M) Berhad isn't a huge company, given its market capitalisation of RM186m. That makes it extra important to check on its balance sheet strength.

Are Tex Cycle Technology (M) 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 Tex Cycle Technology (M) Berhad will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Owning 37% 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. Although, with Tex Cycle Technology (M) Berhad being valued at RM186m, this is a small company we're talking about. That means insiders only have RM68m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.