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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Timberwell Berhad (KLSE:TIMWELL), which has not only revenues, but also profits. 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.
Check out our latest analysis for Timberwell Berhad
How Quickly Is Timberwell Berhad Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Timberwell Berhad managed to grow EPS by 14% per year, over three years. That's a good rate of growth, if it can be sustained.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Despite consistency in EBIT margins year on year, Timberwell Berhad has actually recorded a dip in revenue. This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Timberwell Berhad isn't a huge company, given its market capitalisation of RM44m. That makes it extra important to check on its balance sheet strength.
Are Timberwell 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 Timberwell 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 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 RM44m Timberwell Berhad is really small for a listed company. That means insiders only have RM35m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!