Here's Why We Think Kenanga Investment Bank Berhad (KLSE:KENANGA) Is Well Worth Watching

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like Kenanga Investment Bank Berhad (KLSE:KENANGA). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Kenanga Investment Bank Berhad

How Fast Is Kenanga Investment Bank Berhad Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. I, for one, am blown away by the fact that Kenanga Investment Bank Berhad has grown EPS by 57% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. I note that Kenanga Investment Bank Berhad's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Kenanga Investment Bank Berhad maintained stable EBIT margins over the last year, all while growing revenue 107% to RM917m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Kenanga Investment Bank Berhad isn't a huge company, given its market capitalization of RM948m. That makes it extra important to check on its balance sheet strength.

Are Kenanga Investment Bank Berhad Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Kenanga Investment Bank Berhad shares worth a considerable sum. With a whopping RM319m worth of shares as a group, insiders have plenty riding on the company's success. At 34% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.

Does Kenanga Investment Bank Berhad Deserve A Spot On Your Watchlist?

Kenanga Investment Bank Berhad's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind Kenanga Investment Bank Berhad is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. What about risks? Every company has them, and we've spotted 2 warning signs for Kenanga Investment Bank Berhad you should know about.

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. 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.
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