Should You Be Adding MN Holdings Berhad (KLSE:MNHLDG) To Your Watchlist Today?

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. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like MN Holdings Berhad (KLSE:MNHLDG). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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How Fast Is MN Holdings 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that MN Holdings Berhad's EPS has grown 35% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. MN Holdings Berhad shareholders can take confidence from the fact that EBIT margins are up from 9.0% to 12%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Check out our latest analysis for MN Holdings Berhad

MN Holdings Berhad isn't a huge company, given its market capitalisation of RM515m. That makes it extra important to check on its balance sheet strength .

Are MN Holdings 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 we're pleased to report that MN Holdings Berhad insiders own a meaningful share of the business. In fact, they own 43% of the shares, making insiders a very influential shareholder group. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. In terms of absolute value, insiders have RM222m invested in the business, at the current share price. So there's plenty there to keep them focused!

Is MN Holdings Berhad Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into MN Holdings Berhad's strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in MN Holdings Berhad's continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. What about risks? Every company has them, and we've spotted 3 warning signs for MN Holdings Berhad (of which 1 is significant!) you should know about.

Although MN Holdings Berhad certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Malaysian companies that not only boast of strong growth but have strong insider backing.

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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.