I Ran A Stock Scan For Earnings Growth And Formosa Prosonic Industries Berhad (KLSE:FPI) Passed With Ease

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 completely lacks a track record of revenue and profit. 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 Formosa Prosonic Industries Berhad (KLSE:FPI). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Formosa Prosonic Industries Berhad

How Quickly Is Formosa Prosonic Industries Berhad Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. As a tree reaches steadily for the sky, Formosa Prosonic Industries Berhad's EPS has grown 21% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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 Formosa Prosonic Industries Berhad is growing revenues, and EBIT margins improved by 6.2 percentage points to 10%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since Formosa Prosonic Industries Berhad is no giant, with a market capitalization of RM675m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Formosa Prosonic Industries Berhad Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Formosa Prosonic Industries Berhad insiders have a significant amount of capital invested in the stock. Indeed, they hold RM148m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 22% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Formosa Prosonic Industries Berhad Deserve A Spot On Your Watchlist?

For growth investors like me, Formosa Prosonic Industries Berhad's raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Even so, be aware that Formosa Prosonic Industries Berhad is showing 1 warning sign in our investment analysis , you should know about...

Although Formosa Prosonic Industries Berhad certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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.

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