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.
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 SDS Group Berhad (KLSE:SDS). 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.
See our latest analysis for SDS Group Berhad
How Fast Is SDS Group Berhad Growing Its Earnings Per Share?
SDS Group Berhad has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. SDS Group Berhad's EPS has risen over the last 12 months, growing from RM0.071 to RM0.085. This amounts to a 20% gain; a figure that shareholders will be pleased to see.
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. SDS Group Berhad maintained stable EBIT margins over the last year, all while growing revenue 9.5% to RM346m. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
Since SDS Group Berhad is no giant, with a market capitalisation of RM459m, you should definitely check its cash and debt before getting too excited about its prospects.
Are SDS Group Berhad Insiders Aligned With All Shareholders?
Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that SDS Group Berhad insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 80%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. With that sort of holding, insiders have about RM369m riding on the stock, at current prices. That's nothing to sneeze at!