If You Like EPS Growth Then Check Out KUB Malaysia Berhad (KLSE:KUB) Before It's Too Late

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.

In contrast to all that, I prefer to spend time on companies like KUB Malaysia Berhad (KLSE:KUB), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for KUB Malaysia Berhad

How Quickly Is KUB Malaysia Berhad Increasing Earnings Per Share?

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). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that KUB Malaysia Berhad has managed to grow EPS by 19% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Unfortunately, KUB Malaysia Berhad's revenue dropped 5.3% last year, but the silver lining is that EBIT margins improved from 4.8% to 15%. That's not ideal.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

KUB Malaysia Berhad isn't a huge company, given its market capitalization of RM362m. That makes it extra important to check on its balance sheet strength.

Are KUB Malaysia Berhad Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that KUB Malaysia Berhad insiders own a significant number of shares certainly appeals to me. In fact, they own 41% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. With that sort of holding, insiders have about RM149m riding on the stock, at current prices. That's nothing to sneeze at!

Is KUB Malaysia Berhad Worth Keeping An Eye On?

You can't deny that KUB Malaysia Berhad has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Still, you should learn about the 2 warning signs we've spotted with KUB Malaysia Berhad (including 1 which makes us a bit uncomfortable) .

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. 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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