Here's Why I Think Sarawak Plantation Berhad (KLSE:SWKPLNT) Is An Interesting Stock

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.

So if you're like me, you might be more interested in profitable, growing companies, like Sarawak Plantation Berhad (KLSE:SWKPLNT). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Sarawak Plantation Berhad

Sarawak Plantation Berhad's Improving Profits

Over the last three years, Sarawak Plantation Berhad has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, Sarawak Plantation Berhad's EPS shot from RM0.075 to RM0.22, over the last year. Year on year growth of 192% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Sarawak Plantation Berhad shareholders can take confidence from the fact that EBIT margins are up from 8.6% to 18%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Sarawak Plantation Berhad's forecast profits?

Are Sarawak Plantation Berhad Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, 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 Sarawak Plantation Berhad insiders have a significant amount of capital invested in the stock. To be specific, they have RM62m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 9.5% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Sarawak Plantation Berhad Deserve A Spot On Your Watchlist?

Sarawak Plantation Berhad's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind Sarawak Plantation Berhad is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. What about risks? Every company has them, and we've spotted 2 warning signs for Sarawak Plantation Berhad (of which 1 is a bit unpleasant!) you should know about.

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.

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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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