With EPS Growth And More, Signature International Berhad (KLSE:SIGN) Makes An Interesting Case

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Signature International Berhad (KLSE:SIGN), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Our analysis indicates that SIGN is potentially overvalued!

Signature International Berhad's Improving Profits

Over the last three years, Signature International Berhad has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Signature International Berhad's EPS grew from RM0.033 to RM0.088, over the previous 12 months. It's a rarity to see 169% year-on-year growth like that. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Signature International Berhad shareholders can take confidence from the fact that EBIT margins are up from 13% to 16%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Since Signature International Berhad is no giant, with a market capitalisation of RM557m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Signature International Berhad Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Signature International Berhad followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they hold RM127m worth of its stock. This considerable investment should help drive long-term value in the business. That amounts to 23% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Signature International Berhad Deserve A Spot On Your Watchlist?

Signature International Berhad's earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Signature International Berhad is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Still, you should learn about the 2 warning signs we've spotted with Signature International Berhad (including 1 which is concerning).

Although Signature International 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.

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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.