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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like My E.G. Services Berhad (KLSE:MYEG), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide My E.G. Services Berhad with the means to add long-term value to shareholders.
Check out our latest analysis for My E.G. Services Berhad
How Fast Is My E.G. Services Berhad Growing?
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. That makes EPS growth an attractive quality for any company. It certainly is nice to see that My E.G. Services Berhad has managed to grow EPS by 17% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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. Unfortunately, My E.G. Services Berhad's revenue dropped 7.0% last year, but the silver lining is that EBIT margins improved from 46% to 58%. That's not a good look.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of My E.G. Services Berhad's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are My E.G. Services 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. My E.G. Services 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. Indeed, they have a considerable amount of wealth invested in it, currently valued at RM682m. Coming in at 13% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.