Is Now The Time To Put SHH Resources Holdings Berhad (KLSE:SHH) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like SHH Resources Holdings Berhad (KLSE:SHH), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for SHH Resources Holdings Berhad

How Fast Is SHH Resources Holdings 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) outcomes. That makes EPS growth an attractive quality for any company. Over the last three years, SHH Resources Holdings Berhad has grown EPS by 8.5% per year. That growth rate is fairly good, assuming the company can keep it up.

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. We note that while EBIT margins have improved from 4.3% to 10%, the company has actually reported a fall in revenue by 3.4%. While not disastrous, these figures could be better.

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

Since SHH Resources Holdings Berhad is no giant, with a market capitalisation of RM112m, you should definitely check its cash and debt before getting too excited about its prospects.

Are SHH Resources Holdings Berhad Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in SHH Resources Holdings Berhad will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Actually, with 45% of the company to their names, insiders are profoundly invested in the business. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Valued at only RM112m SHH Resources Holdings Berhad is really small for a listed company. That means insiders only have RM50m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Is SHH Resources Holdings Berhad Worth Keeping An Eye On?

One important encouraging feature of SHH Resources Holdings Berhad is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. The combination definitely favoured by investors so consider keeping the company on a watchlist. It is worth noting though that we have found 2 warning signs for SHH Resources Holdings Berhad that you need to take into consideration.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Malaysian companies which have demonstrated growth backed by significant insider holdings.

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.