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

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like YBS International Berhad (KLSE:YBS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide YBS International Berhad with the means to add long-term value to shareholders.

Our analysis indicates that YBS is potentially overvalued!

How Fast Is YBS International Berhad Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that YBS International Berhad has grown EPS by 60% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that YBS International Berhad is growing revenues, and EBIT margins improved by 6.3 percentage points to 12%, 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. To see the actual numbers, click on the chart.

Since YBS International Berhad is no giant, with a market capitalisation of RM150m, you should definitely check its cash and debt before getting too excited about its prospects.

Are YBS International Berhad Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalisations under RM936m, like YBS International Berhad, the median CEO pay is around RM497k.

The CEO of YBS International Berhad was paid just RM45k in total compensation for the year ending March 2022. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Is YBS International Berhad Worth Keeping An Eye On?

YBS International Berhad's earnings have taken off in quite an impressive fashion. With increasing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. Meanwhile, the very reasonable CEO pay is a great reassurance, since it points to an absence of wasteful spending habits. So YBS International Berhad looks like it could be a good quality growth stock, at first glance. That's worth watching. What about risks? Every company has them, and we've spotted 5 warning signs for YBS International Berhad (of which 2 are concerning!) you should know about.

The beauty of investing is that you can invest in almost 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.