Here's Why I Think UMS-Neiken Group Berhad (KLSE:UMSNGB) Might Deserve Your Attention Today

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 UMS-Neiken Group Berhad (KLSE:UMSNGB). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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 UMS-Neiken Group Berhad

How Quickly Is UMS-Neiken Group Berhad Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. Over the last three years, UMS-Neiken Group Berhad has grown EPS by 5.1% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that UMS-Neiken Group Berhad is growing revenues, and EBIT margins improved by 4.8 percentage points to 14%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

Since UMS-Neiken Group Berhad is no giant, with a market capitalization of RM89m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are UMS-Neiken Group 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 UMS-Neiken Group Berhad insiders own a significant number of shares certainly appeals to me. Actually, with 39% of the company to their names, insiders are profoundly invested in the business. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. Valued at only RM89m UMS-Neiken Group Berhad is really small for a listed company. So despite a large proportional holding, insiders only have RM35m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Is UMS-Neiken Group Berhad Worth Keeping An Eye On?

One important encouraging feature of UMS-Neiken Group Berhad is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. We should say that we've discovered 2 warning signs for UMS-Neiken Group Berhad (1 is a bit unpleasant!) that you should be aware of before investing here.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.