Here's Why I Think Teck Guan Perdana Berhad (KLSE:TECGUAN) Might Deserve Your Attention 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. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Teck Guan Perdana Berhad (KLSE:TECGUAN). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Teck Guan Perdana Berhad

How Fast Is Teck Guan Perdana Berhad Growing Its Earnings Per Share?

In the last three years Teck Guan Perdana 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. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, Teck Guan Perdana Berhad's EPS shot from RM0.20 to RM0.54, over the last year. Year on year growth of 173% is certainly a sight to behold.

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. The good news is that Teck Guan Perdana Berhad is growing revenues, and EBIT margins improved by 3.3 percentage points to 5.7%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

Teck Guan Perdana Berhad isn't a huge company, given its market capitalization of RM65m. That makes it extra important to check on its balance sheet strength.

Are Teck Guan Perdana Berhad Insiders Aligned With All Shareholders?

As a general rule, I think it worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. I discovered that the median total compensation for the CEOs of companies like Teck Guan Perdana Berhad with market caps under RM842m is about RM519k.

The Teck Guan Perdana Berhad CEO received total compensation of only RM207k in the year to . 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. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Teck Guan Perdana Berhad To Your Watchlist?

Teck Guan Perdana Berhad's earnings per share have taken off like a rocket aimed right at the moon. With rocketing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. At the same time the reasonable CEO compensation reflects well on the board of directors. While I couldn't be sure without a deeper dive, it does seem that Teck Guan Perdana Berhad has the hallmarks of a quality business; and that would make it well worth watching. We don't want to rain on the parade too much, but we did also find 3 warning signs for Teck Guan Perdana Berhad (1 can't be ignored!) that you need to be mindful of.

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. 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.