Is Now The Time To Put Kein Hing International Berhad (KLSE:KEINHIN) On Your Watchlist?

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 as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Kein Hing International Berhad (KLSE:KEINHIN). 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. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Kein Hing International Berhad

Kein Hing International 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). It's no surprise, then, that I like to invest in companies with EPS growth. I, for one, am blown away by the fact that Kein Hing International Berhad has grown EPS by 42% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. This approach makes Kein Hing International Berhad look pretty good, on balance; although revenue is flattish, EBIT margins improved from 4.2% to 7.0% in the last year. That's something to smile about.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

Since Kein Hing International Berhad is no giant, with a market capitalization of RM95m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Kein Hing International Berhad Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Kein Hing International Berhad insiders own a significant number of shares certainly appeals to me. In fact, they own 70% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have RM66m invested in the business, using the current share price. That's nothing to sneeze at!

Does Kein Hing International Berhad Deserve A Spot On Your Watchlist?

Kein Hing International Berhad's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Kein Hing International Berhad for a spot on your watchlist. Even so, be aware that Kein Hing International Berhad is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

Although Kein Hing International 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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