With EPS Growth And More, LPI Capital Bhd (KLSE:LPI) Makes An Interesting Case

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like LPI Capital Bhd (KLSE:LPI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide LPI Capital Bhd with the means to add long-term value to shareholders.

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How Quickly Is LPI Capital Bhd Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. LPI Capital Bhd managed to grow EPS by 4.5% per year, over three years. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

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. Unfortunately, LPI Capital Bhd's revenue dropped 4.4% last year, but the silver lining is that EBIT margins improved from 20% to 24%. That falls short of ideal.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

See our latest analysis for LPI Capital Bhd

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

Are LPI Capital Bhd Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that LPI Capital Bhd insiders have a significant amount of capital invested in the stock. Indeed, they hold RM192m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 3.2%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Should You Add LPI Capital Bhd To Your Watchlist?

One positive for LPI Capital Bhd is that it is growing EPS. That's nice to see. To add an extra spark to the fire, significant insider ownership in the company is another highlight. These two factors are a huge highlight for the company which should be a strong contender your watchlists. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for LPI Capital Bhd (1 is potentially serious) 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.