If EPS Growth Is Important To You, Paragon Globe Berhad (KLSE:PGLOBE) Presents An Opportunity

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 Paragon Globe Berhad (KLSE:PGLOBE). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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How Fast Is Paragon Globe Berhad Growing Its Earnings Per Share?

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It is awe-striking that Paragon Globe Berhad's EPS went from RM0.0071 to RM0.16 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

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. The good news is that Paragon Globe Berhad is growing revenues, and EBIT margins improved by 34.7 percentage points to 45%, over the last year. Both of which are great metrics to check off for potential growth.

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 Paragon Globe Berhad

Since Paragon Globe Berhad is no giant, with a market capitalisation of RM560m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Paragon Globe Berhad Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Paragon Globe Berhad insiders have a significant amount of capital invested in the stock. To be specific, they have RM84m worth of shares. This considerable investment should help drive long-term value in the business. That amounts to 15% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add Paragon Globe Berhad To Your Watchlist?

Paragon Globe Berhad's earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Paragon Globe Berhad very closely. It is worth noting though that we have found 2 warning signs for Paragon Globe Berhad that you need to take into consideration.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Malaysian companies which have demonstrated growth backed by significant insider holdings.

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.