Stock Analysis

Here's Why I Think Sarawak Oil Palms Berhad (KLSE:SOP) Is An Interesting Stock

KLSE:SOP
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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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.

So if you're like me, you might be more interested in profitable, growing companies, like Sarawak Oil Palms Berhad (KLSE:SOP). 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.

Check out our latest analysis for Sarawak Oil Palms Berhad

How Fast Is Sarawak Oil Palms Berhad Growing Its Earnings Per Share?

In the last three years Sarawak Oil Palms 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 firecracker arcing through the night sky, Sarawak Oil Palms Berhad's EPS shot from RM0.36 to RM0.89, over the last year. You don't see 150% year-on-year growth like that, very often. That could be a sign that the business has reached a true inflection point.

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. Sarawak Oil Palms Berhad shareholders can take confidence from the fact that EBIT margins are up from 12% to 17%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

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.

earnings-and-revenue-history
KLSE:SOP Earnings and Revenue History April 1st 2022

Fortunately, we've got access to analyst forecasts of Sarawak Oil Palms Berhad's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Sarawak Oil Palms 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 Sarawak Oil Palms Berhad insiders have a significant amount of capital invested in the stock. With a whopping RM264m worth of shares as a group, insiders have plenty riding on the company's success. At 8.8% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.

Should You Add Sarawak Oil Palms Berhad To Your Watchlist?

Sarawak Oil Palms Berhad's earnings per share have taken off like a rocket aimed right at the moon. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Sarawak Oil Palms Berhad for a spot on your watchlist. Still, you should learn about the 2 warning signs we've spotted with Sarawak Oil Palms Berhad (including 1 which shouldn't be ignored) .

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.

Valuation is complex, but we're helping make it simple.

Find out whether Sarawak Oil Palms Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.