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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.
In contrast to all that, many investors prefer to focus on companies like EG Industries Berhad (KLSE:EG), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
View our latest analysis for EG Industries Berhad
How Quickly Is EG Industries Berhad Increasing Earnings Per Share?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. To the delight of shareholders, EG Industries Berhad has achieved impressive annual EPS growth of 39%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. We note that while EBIT margins have improved from 4.5% to 7.0%, the company has actually reported a fall in revenue by 15%. That falls short of ideal.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Since EG Industries Berhad is no giant, with a market capitalisation of RM881m, you should definitely check its cash and debt before getting too excited about its prospects.
Are EG Industries Berhad Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that EG Industries Berhad insiders have a significant amount of capital invested in the stock. To be specific, they have RM183m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 21% of the shares on issue for the business, an appreciable amount considering the market cap.