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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like UMS Holdings Berhad (KLSE:UMS). 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.
See our latest analysis for UMS Holdings Berhad
UMS Holdings Berhad's Earnings Per Share Are Growing
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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that UMS Holdings Berhad's EPS has grown 31% each year, compound, 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. This approach makes UMS Holdings Berhad look pretty good, on balance; although revenue is flattish, EBIT margins improved from 19% to 26% in the last year. Which is a great look for the company.
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 UMS Holdings Berhad is no giant, with a market capitalisation of RM92m, you should definitely check its cash and debt before getting too excited about its prospects.
Are UMS Holdings Berhad Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in UMS Holdings Berhad will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Indeed, with a collective holding of 58%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Valued at only RM92m UMS Holdings Berhad is really small for a listed company. That means insiders only have RM53m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!