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 SKP Resources Bhd (KLSE:SKPRES). 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.
Check out our latest analysis for SKP Resources Bhd
SKP Resources Bhd's Earnings Per Share Are Growing
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 means EPS growth is considered a real positive by most successful long-term investors. Impressively, SKP Resources Bhd has grown EPS by 26% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
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. SKP Resources Bhd reported flat revenue and EBIT margins over the last year. That's not bad, but it doesn't point to ongoing future growth, either.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of SKP Resources Bhd's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are SKP Resources Bhd Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own SKP Resources Bhd shares worth a considerable sum. As a matter of fact, their holding is valued at RM127m. That's a lot of money, and no small incentive to work hard. Even though that's only about 5.0% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.