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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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Kein Hing International Berhad (KLSE:KEINHIN). 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 Kein Hing International Berhad
Kein Hing International Berhad's Improving Profits
Kein Hing International Berhad has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Kein Hing International Berhad's EPS shot from RM0.084 to RM0.20, over the last year. It's a rarity to see 139% year-on-year growth like that. That could be a sign that the business has reached a true inflection point.
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. The music to the ears of Kein Hing International Berhad shareholders is that EBIT margins have grown from 6.2% to 11% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.
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 Kein Hing International Berhad is no giant, with a market capitalisation of RM134m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Kein Hing International 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 as you can imagine, the fact that Kein Hing International Berhad insiders own a significant number of shares certainly is appealing. In fact, they own 72% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. In terms of absolute value, insiders have RM97m invested in the business, at the current share price. That's nothing to sneeze at!