Do ES Ceramics Technology Berhad's (KLSE:ESCERAM) Earnings Warrant Your Attention?

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.

So if you're like me, you might be more interested in profitable, growing companies, like ES Ceramics Technology Berhad (KLSE:ESCERAM). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for ES Ceramics Technology Berhad

ES Ceramics Technology Berhad's Earnings Per Share Are 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). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. As a tree reaches steadily for the sky, ES Ceramics Technology Berhad's EPS has grown 31% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. ES Ceramics Technology Berhad shareholders can take confidence from the fact that EBIT margins are up from 3.9% to 17%, and revenue is growing. That's great to see, on both counts.

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 ES Ceramics Technology Berhad is no giant, with a market capitalization of RM223m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are ES Ceramics Technology Berhad Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that ES Ceramics Technology Berhad insiders have a significant amount of capital invested in the stock. To be specific, they have RM58m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 26% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add ES Ceramics Technology Berhad To Your Watchlist?

For growth investors like me, ES Ceramics Technology Berhad's raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. However, before you get too excited we've discovered 4 warning signs for ES Ceramics Technology Berhad (1 is a bit unpleasant!) that you should be aware of.

Although ES Ceramics Technology Berhad certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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

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This article by Simply Wall St is general in nature. 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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