It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Inta Bina Group Berhad (KLSE:INTA). 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.
View our latest analysis for Inta Bina Group Berhad
How Quickly Is Inta Bina Group 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Inta Bina Group Berhad managed to grow EPS by 7.9% per year, over three years. While that sort of growth rate isn't anything to write home about, it does show the business is growing.
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. While we note Inta Bina Group Berhad achieved similar EBIT margins to last year, revenue grew by a solid 45% to RM566m. That's progress.
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.
Since Inta Bina Group Berhad is no giant, with a market capitalisation of RM142m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Inta Bina 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 Inta Bina Group Berhad insiders own a significant number of shares certainly is appealing. In fact, they own 48% of the shares, making insiders a very influential shareholder group. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. Although, with Inta Bina Group Berhad being valued at RM142m, this is a small company we're talking about. So despite a large proportional holding, insiders only have RM68m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.