Do CCK Consolidated Holdings Berhad's (KLSE:CCK) Earnings Warrant Your Attention?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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.

In contrast to all that, many investors prefer to focus on companies like CCK Consolidated Holdings Berhad (KLSE:CCK), which has not only revenues, but also profits. 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.

Our analysis indicates that CCK is potentially undervalued!

CCK Consolidated Holdings Berhad's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, CCK Consolidated Holdings Berhad has grown EPS by 30% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. CCK Consolidated Holdings Berhad maintained stable EBIT margins over the last year, all while growing revenue 21% to RM825m. That's progress.

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.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for CCK Consolidated Holdings Berhad's future profits.

Are CCK Consolidated Holdings Berhad Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that CCK Consolidated Holdings Berhad insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at RM110m. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 26% of the shares on issue for the business, an appreciable amount considering the market cap.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations under RM898m, like CCK Consolidated Holdings Berhad, the median CEO pay is around RM485k.

The CCK Consolidated Holdings Berhad CEO received total compensation of only RM13k in the year to December 2021. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Does CCK Consolidated Holdings Berhad Deserve A Spot On Your Watchlist?

For growth investors, CCK Consolidated Holdings Berhad's raw rate of earnings growth is a beacon in the night. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. The overarching message here is that CCK Consolidated Holdings Berhad has underlying strengths that make it worth a look at. Still, you should learn about the 2 warning signs we've spotted with CCK Consolidated Holdings Berhad (including 1 which makes us a bit uncomfortable).

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 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.