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. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Hong Leong Industries Berhad (KLSE:HLIND). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Hong Leong Industries Berhad with the means to add long-term value to shareholders.
Check out our latest analysis for Hong Leong Industries Berhad
Hong Leong Industries Berhad's Improving Profits
Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. To the delight of shareholders, Hong Leong Industries Berhad's EPS soared from RM0.57 to RM0.93, over the last year. That's a commendable gain of 65%.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Hong Leong Industries Berhad remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 60% to RM3.4b. That's a real positive.
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.
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are Hong Leong 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. Hong Leong Industries 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. To be specific, they have RM86m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 3.0%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.