Should You Be Adding Sin Heng Chan (Malaya) Berhad (KLSE:SHCHAN) To Your Watchlist Today?

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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Sin Heng Chan (Malaya) Berhad (KLSE:SHCHAN). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.

View our latest analysis for Sin Heng Chan (Malaya) Berhad

How Fast Is Sin Heng Chan (Malaya) Berhad Growing Its Earnings Per Share?

In the last three years Sin Heng Chan (Malaya) Berhad's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, Sin Heng Chan (Malaya) Berhad's EPS soared from RM0.023 to RM0.032, in just one year. That's a commendable gain of 36%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While Sin Heng Chan (Malaya) Berhad did well to grow revenue over the last year, EBIT margins were dampened at the same time. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Sin Heng Chan (Malaya) Berhad isn't a huge company, given its market capitalization of RM101m. That makes it extra important to check on its balance sheet strength.

Are Sin Heng Chan (Malaya) 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 we're pleased to report that Sin Heng Chan (Malaya) Berhad insiders own a meaningful share of the business. Actually, with 36% of the company to their names, insiders are profoundly invested in the business. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. Of course, Sin Heng Chan (Malaya) Berhad is a very small company, with a market cap of only RM101m. That means insiders only have RM37m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does Sin Heng Chan (Malaya) Berhad Deserve A Spot On Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Sin Heng Chan (Malaya) Berhad's strong EPS growth. 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. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Sin Heng Chan (Malaya) Berhad (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

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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