Here's Why EG Industries Berhad (KLSE:EG) Has Caught The Eye Of Investors

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in EG Industries Berhad (KLSE:EG). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for EG Industries Berhad

How Fast Is EG Industries Berhad Growing Its Earnings Per Share?

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. Commendations have to be given in seeing that EG Industries Berhad grew its EPS from RM0.028 to RM0.085, in one short year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. This could point to the business hitting a point of inflection.

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. EG Industries Berhad shareholders can take confidence from the fact that EBIT margins are up from 1.4% to 4.4%, and revenue is growing. Both of which are great metrics to check off for potential growth.

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 EG Industries Berhad is no giant, with a market capitalisation of RM684m, you should definitely check its cash and debt before getting too excited about its prospects.

Are EG Industries 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 EG Industries Berhad insiders have a significant amount of capital invested in the stock. To be specific, they have RM204m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 30% of the shares on issue for the business, an appreciable amount considering the market cap.

Is EG Industries Berhad Worth Keeping An Eye On?

EG Industries Berhad's earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. 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 EG Industries Berhad very closely. Still, you should learn about the 3 warning signs we've spotted with EG Industries Berhad (including 1 which is a bit unpleasant).

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.