If EPS Growth Is Important To You, Sunzen Biotech Berhad (KLSE:SUNZEN) Presents An Opportunity

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to 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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Sunzen Biotech Berhad (KLSE:SUNZEN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Sunzen Biotech Berhad with the means to add long-term value to shareholders.

Check out our latest analysis for Sunzen Biotech Berhad

Sunzen Biotech Berhad's Improving Profits

Over the last three years, Sunzen Biotech 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. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Sunzen Biotech Berhad's EPS grew from RM0.0053 to RM0.0097, over the previous 12 months. Year on year growth of 82% 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. This approach makes Sunzen Biotech Berhad look pretty good, on balance; although revenue is flattish, EBIT margins improved from 8.0% to 12% in the last year. That's a real positive.

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.

Sunzen Biotech Berhad isn't a huge company, given its market capitalisation of RM282m. That makes it extra important to check on its balance sheet strength.

Are Sunzen Biotech Berhad Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Sunzen Biotech Berhad insiders own a significant number of shares certainly is appealing. To be exact, company insiders hold 66% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. In terms of absolute value, insiders have RM186m invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Sunzen Biotech Berhad with market caps under RM942m is about RM505k.

Sunzen Biotech Berhad's CEO only received compensation totalling RM214k in the year to December 2022. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, 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.

Is Sunzen Biotech Berhad Worth Keeping An Eye On?

Sunzen Biotech Berhad's earnings have taken off in quite an impressive fashion. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The strong EPS improvement suggests the businesses is humming along. Sunzen Biotech Berhad is certainly doing some things right and is well worth investigating. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Sunzen Biotech Berhad that you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Malaysian companies which have demonstrated growth backed by significant insider holdings.

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.