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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 Hiap Huat Holdings Berhad (KLSE:HHHCORP). 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 Hiap Huat Holdings Berhad
How Quickly Is Hiap Huat Holdings Berhad Increasing Earnings Per Share?
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. Impressively, Hiap Huat Holdings Berhad has grown EPS by 26% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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. Hiap Huat Holdings Berhad shareholders can take confidence from the fact that EBIT margins are up from 9.4% to 13%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Hiap Huat Holdings Berhad isn't a huge company, given its market capitalisation of RM53m. That makes it extra important to check on its balance sheet strength.
Are Hiap Huat Holdings Berhad Insiders Aligned With All Shareholders?
Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Hiap Huat Holdings Berhad insiders own a significant number of shares certainly is appealing. To be exact, company insiders hold 61% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Although, with Hiap Huat Holdings Berhad being valued at RM53m, this is a small company we're talking about. So despite a large proportional holding, insiders only have RM33m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.