Should You Be Adding Ancom Nylex Berhad (KLSE:ANCOMNY) To Your Watchlist Today?

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Ancom Nylex Berhad (KLSE:ANCOMNY). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Ancom Nylex Berhad

Ancom Nylex Berhad's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. As a tree reaches steadily for the sky, Ancom Nylex Berhad's EPS has grown 35% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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). Ancom Nylex Berhad maintained stable EBIT margins over the last year, all while growing revenue 35% to RM1.9b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Ancom Nylex Berhad isn't a huge company, given its market capitalization of RM981m. That makes it extra important to check on its balance sheet strength.

Are Ancom Nylex Berhad Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Ancom Nylex Berhad insiders have a significant amount of capital invested in the stock. With a whopping RM328m worth of shares as a group, insiders have plenty riding on the company's success. At 33% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.

Is Ancom Nylex Berhad Worth Keeping An Eye On?

For growth investors like me, Ancom Nylex Berhad's raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Still, you should learn about the 2 warning signs we've spotted with Ancom Nylex Berhad (including 1 which is potentially serious) .

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.