Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Tex Cycle Technology (M) Berhad (KLSE:TEXCYCL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Tex Cycle Technology (M) Berhad with the means to add long-term value to shareholders.

Check out our latest analysis for Tex Cycle Technology (M) Berhad

How Quickly Is Tex Cycle Technology (M) Berhad Increasing Earnings Per Share?

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 makes EPS growth an attractive quality for any company. It certainly is nice to see that Tex Cycle Technology (M) Berhad has managed to grow EPS by 24% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. While Tex Cycle Technology (M) Berhad did well to grow revenue over the last year, EBIT margins were dampened at the same time. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

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.

Tex Cycle Technology (M) Berhad isn't a huge company, given its market capitalisation of RM206m. That makes it extra important to check on its balance sheet strength.

Are Tex Cycle Technology (M) 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. Shareholders will be pleased by the fact that insiders own Tex Cycle Technology (M) Berhad shares worth a considerable sum. To be specific, they have RM59m worth of shares. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 29% of the shares on issue for the business, an appreciable amount considering the market cap.

Should You Add Tex Cycle Technology (M) Berhad To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Tex Cycle Technology (M) Berhad's strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Tex Cycle Technology (M) Berhad (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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