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.' 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 REDtone Digital Berhad (KLSE:REDTONE). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for REDtone Digital Berhad

How Fast Is REDtone Digital Berhad Growing?

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. Impressively, REDtone Digital Berhad has grown EPS by 32% 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.

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. While REDtone Digital Berhad did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

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 REDtone Digital Berhad is no giant, with a market capitalisation of RM773m, you should definitely check its cash and debt before getting too excited about its prospects.

Are REDtone Digital Berhad Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. REDtone Digital Berhad followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have RM147m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 19% of the company, demonstrating a degree of high-level alignment with shareholders.