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.' 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Carimin Petroleum Berhad (KLSE:CARIMIN). 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 Carimin Petroleum Berhad
Carimin Petroleum Berhad's Improving Profits
In the last three years Carimin Petroleum 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. As a result, we'll zoom in on growth over the last year, instead. Carimin Petroleum Berhad's EPS shot up from RM0.088 to RM0.14; a result that's bound to keep shareholders happy. That's a impressive gain of 64%.
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. On the one hand, Carimin Petroleum Berhad's EBIT margins fell over the last year, but on the other hand, revenue grew. So it seems the future may hold further growth, especially if EBIT margins can remain steady.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Since Carimin Petroleum Berhad is no giant, with a market capitalisation of RM207m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Carimin Petroleum Berhad 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. Carimin Petroleum Berhad followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they hold RM65m worth of its stock. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 31% of the shares on issue for the business, an appreciable amount considering the market cap.