Here's Why I Think Prolexus Berhad (KLSE:PRLEXUS) Might Deserve Your Attention Today

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 Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Prolexus Berhad (KLSE:PRLEXUS). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for Prolexus Berhad

How Fast Is Prolexus Berhad 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. As a tree reaches steadily for the sky, Prolexus Berhad's EPS has grown 18% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Unfortunately, Prolexus Berhad's revenue dropped 11% last year, but the silver lining is that EBIT margins improved from 5.0% to 14%. That's not ideal.

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 Prolexus Berhad is no giant, with a market capitalization of RM251m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Prolexus 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 Prolexus Berhad insiders have a significant amount of capital invested in the stock. To be specific, they have RM77m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 31% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Prolexus Berhad Deserve A Spot On Your Watchlist?

For growth investors like me, Prolexus Berhad's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Prolexus Berhad (at least 1 which is concerning) , and understanding them should be part of your investment process.

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. 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.
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