Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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.
In contrast to all that, many investors prefer to focus on companies like Eonmetall Group Berhad (KLSE:EMETALL), which has not only revenues, but also profits. 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.
Check out our latest analysis for Eonmetall Group Berhad
Eonmetall Group Berhad's Improving Profits
Over the last three years, Eonmetall Group Berhad has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Eonmetall Group Berhad's EPS skyrocketed from RM0.087 to RM0.13, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 50%.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that Eonmetall Group Berhad is growing revenues, and EBIT margins improved by 5.8 percentage points to 15%, over the last year. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Eonmetall Group Berhad isn't a huge company, given its market capitalisation of RM176m. That makes it extra important to check on its balance sheet strength.
Are Eonmetall Group Berhad Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own Eonmetall Group Berhad shares worth a considerable sum. To be specific, they have RM54m worth of shares. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 30% of the shares on issue for the business, an appreciable amount considering the market cap.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Eonmetall Group Berhad with market caps under RM885m is about RM494k.