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 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 KKB Engineering Berhad (KLSE:KKB). 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.
Check out our latest analysis for KKB Engineering Berhad
KKB Engineering Berhad's Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, KKB Engineering Berhad has grown EPS by 5.7% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. KKB Engineering Berhad shareholders can take confidence from the fact that EBIT margins are up from 6.9% to 9.4%, and revenue is growing. That's great to see, on both counts.
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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for KKB Engineering Berhad's future EPS 100% free.
Are KKB Engineering 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 KKB Engineering Berhad insiders have a significant amount of capital invested in the stock. To be specific, they have RM86m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 18% of the company, demonstrating a degree of high-level alignment with shareholders.