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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in NCT Alliance Berhad (KLSE:NCT). 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 NCT Alliance Berhad
How Fast Is NCT Alliance Berhad Growing Its Earnings Per Share?
In the last three years NCT Alliance 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. To the delight of shareholders, NCT Alliance Berhad's EPS soared from RM0.031 to RM0.041, over the last year. That's a commendable gain of 29%.
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 NCT Alliance Berhad shareholders is that EBIT margins have grown from 23% to 31% 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.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Since NCT Alliance Berhad is no giant, with a market capitalisation of RM373m, you should definitely check its cash and debt before getting too excited about its prospects.
Are NCT Alliance Berhad Insiders Aligned With All Shareholders?
As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. The median total compensation for CEOs of companies similar in size to NCT Alliance Berhad, with market caps under RM945m is around RM507k.
NCT Alliance Berhad's CEO took home a total compensation package worth RM286k in the year leading up to December 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.