With EPS Growth And More, Kenanga Investment Bank Berhad (KLSE:KENANGA) Is Interesting

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and 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.

In contrast to all that, I prefer to spend time on companies like Kenanga Investment Bank Berhad (KLSE:KENANGA), which has not only revenues, but also profits. 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.

View our latest analysis for Kenanga Investment Bank Berhad

Kenanga Investment Bank Berhad's Improving Profits

Over the last three years, Kenanga Investment Bank Berhad has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. It's good to see that Kenanga Investment Bank Berhad's EPS have grown from RM0.15 to RM0.16 over twelve months. That's a 12% gain; respectable growth in the broader scheme of things.

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. While Kenanga Investment Bank Berhad may have maintained EBIT margins over the last year, revenue has fallen. Suffice it to say that is not a great sign of growth.

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 Kenanga Investment Bank Berhad is no giant, with a market capitalization of RM984m, so you should definitely check its cash and debt before getting too excited about its prospects.

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. So it is good to see that Kenanga Investment Bank Berhad insiders have a significant amount of capital invested in the stock. With a whopping RM334m worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 34% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

Should You Add Kenanga Investment Bank Berhad To Your Watchlist?

One important encouraging feature of Kenanga Investment Bank Berhad is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Even so, be aware that Kenanga Investment Bank Berhad is showing 1 warning sign in our investment analysis , you should know about...

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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.