Does MPHB Capital Berhad (KLSE:MPHBCAP) Deserve A Spot 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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like MPHB Capital Berhad (KLSE:MPHBCAP). 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.

View our latest analysis for MPHB Capital Berhad

MPHB Capital Berhad's Improving Profits

MPHB Capital Berhad has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, MPHB Capital Berhad's EPS grew from RM0.02 to RM0.035, over the previous 12 months. Year on year growth of 69% is certainly a sight to behold.

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. Our analysis has highlighted that MPHB Capital Berhad's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. MPHB Capital Berhad's EBIT margins have actually improved by 18.5 percentage points in the last year, to reach 67%, but, on the flip side, revenue was down 33%. That falls short of ideal.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Since MPHB Capital Berhad is no giant, with a market capitalisation of RM962m, you should definitely check its cash and debt before getting too excited about its prospects.

Are MPHB Capital 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 as you can imagine, the fact that MPHB Capital Berhad insiders own a significant number of shares certainly is appealing. In fact, they own 44% of the shares, making insiders a very influential shareholder group. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. To give you an idea, the value of insiders' holdings in the business are valued at RM426m at the current share price. So there's plenty there to keep them focused!

Does MPHB Capital Berhad Deserve A Spot On Your Watchlist?

MPHB Capital 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. 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 based on this quick analysis, we do think it's worth considering MPHB Capital Berhad for a spot on your watchlist. Even so, be aware that MPHB Capital Berhad is showing 1 warning sign in our investment analysis , you should know about...

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 recent insider purchases.

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.