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. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 MAG Holdings Berhad (KLSE:MAG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide MAG Holdings Berhad with the means to add long-term value to shareholders.

Check out our latest analysis for MAG Holdings Berhad

MAG Holdings Berhad's Improving Profits

MAG Holdings 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. So it would be better to isolate the growth rate over the last year for our analysis. MAG Holdings Berhad's EPS has risen over the last 12 months, growing from RM0.011 to RM0.013. That's a 22% gain; respectable growth in the broader scheme of things. It also seems the company is in good financial health, since it has boosted EPS by buying back shares.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for MAG Holdings Berhad remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 87% to RM178m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

MAG Holdings Berhad isn't a huge company, given its market capitalisation of RM310m. That makes it extra important to check on its balance sheet strength.

Are MAG 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 MAG Holdings Berhad insiders own a significant number of shares certainly is appealing. Actually, with 41% of the company to their names, insiders are profoundly invested in the business. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. In terms of absolute value, insiders have RM126m invested in the business, at the current share price. So there's plenty there to keep them focused!

Should You Add MAG Holdings Berhad To Your Watchlist?

One positive for MAG Holdings Berhad is that it is growing EPS. That's nice to see. To add an extra spark to the fire, significant insider ownership in the company is another highlight. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. We don't want to rain on the parade too much, but we did also find 2 warning signs for MAG Holdings Berhad that you need to be mindful of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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