Should You Be Adding Sarawak Oil Palms Berhad (KLSE:SOP) To Your Watchlist Today?

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Sarawak Oil Palms Berhad (KLSE:SOP), 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.

Check out our latest analysis for Sarawak Oil Palms Berhad

Sarawak Oil Palms Berhad's Improving Profits

Over the last three years, Sarawak Oil Palms Berhad has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Impressively, Sarawak Oil Palms Berhad's EPS catapulted from RM0.32 to RM0.77, over the last year. It's not often a company can achieve year-on-year growth of 143%. The best case scenario? That the business has hit a true inflection point.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The good news is that Sarawak Oil Palms Berhad is growing revenues, and EBIT margins improved by 4.2 percentage points to 17%, over the last year. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Sarawak Oil Palms Berhad's future EPS 100% free.

Are Sarawak Oil Palms Berhad Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Sarawak Oil Palms Berhad insiders have a significant amount of capital invested in the stock. To be specific, they have RM198m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 9.9% of the company; visible skin in the game.

Does Sarawak Oil Palms Berhad Deserve A Spot On Your Watchlist?

Sarawak Oil Palms Berhad's earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Sarawak Oil Palms Berhad for a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 3 warning signs for Sarawak Oil Palms Berhad (1 is a bit concerning!) that you need to be mindful of.

The beauty of investing is that you can invest in almost 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.

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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.