Stock Analysis

We Ran A Stock Scan For Earnings Growth And My E.G. Services Berhad (KLSE:MYEG) Passed With Ease

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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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 My E.G. Services Berhad (KLSE:MYEG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide My E.G. Services Berhad with the means to add long-term value to shareholders.

View our latest analysis for My E.G. Services Berhad

How Fast Is My E.G. Services Berhad Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, My E.G. Services Berhad has grown EPS by 16% per year. That's a pretty good rate, if the company can sustain it.

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. My E.G. Services Berhad's EBIT margins have actually improved by 11.1 percentage points in the last year, to reach 56%, but, on the flip side, revenue was down 9.8%. While not disastrous, these figures could be better.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

KLSE:MYEG Earnings and Revenue History April 2nd 2023

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for My E.G. Services Berhad?

Are My E.G. Services Berhad Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that My E.G. Services Berhad insiders have a significant amount of capital invested in the stock. Notably, they have an enviable stake in the company, worth RM752m. Coming in at 13% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like My E.G. Services Berhad with market caps between RM4.4b and RM14b is about RM2.2m.

The My E.G. Services Berhad CEO received total compensation of only RM206k in the year to December 2021. 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.

Should You Add My E.G. Services Berhad To Your Watchlist?

As previously touched on, My E.G. Services Berhad is a growing business, which is encouraging. The growth of EPS may be the eye-catching headline for My E.G. Services Berhad, but there's more to bring joy for shareholders. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with My E.G. Services Berhad (at least 1 which is potentially serious) , and understanding these should be part of your investment process.

Although My E.G. Services Berhad certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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

Valuation is complex, but we're helping make it simple.

Find out whether My E.G. Services Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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