With EPS Growth And More, Wong Engineering Corporation Berhad (KLSE:WONG) Is Interesting

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Wong Engineering Corporation Berhad (KLSE:WONG). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Wong Engineering Corporation Berhad

Wong Engineering Corporation 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). That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Wong Engineering Corporation Berhad has grown EPS by 7.1% 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 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. The good news is that Wong Engineering Corporation Berhad is growing revenues, and EBIT margins improved by 10.5 percentage points to 16%, 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. Click on the chart to see the exact numbers.

Wong Engineering Corporation Berhad isn't a huge company, given its market capitalization of RM158m. That makes it extra important to check on its balance sheet strength.

Are Wong Engineering Corporation 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 Wong Engineering Corporation Berhad insiders own a meaningful share of the business. In fact, they own 42% of the shares, making insiders a very influential shareholder group. 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. With that sort of holding, insiders have about RM67m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations under RM840m, like Wong Engineering Corporation Berhad, the median CEO pay is around RM515k.

The Wong Engineering Corporation Berhad CEO received RM314k in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Wong Engineering Corporation Berhad To Your Watchlist?

As I already mentioned, Wong Engineering Corporation Berhad is a growing business, which is what I like to see. The fact that EPS is growing is a genuine positive for Wong Engineering Corporation Berhad, but the pretty picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. We should say that we've discovered 2 warning signs for Wong Engineering Corporation Berhad that you should be aware of before investing here.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.