Here's Why I Think BP Plastics Holding Bhd (KLSE:BPPLAS) Is An Interesting Stock

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. 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in BP Plastics Holding Bhd (KLSE:BPPLAS). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for BP Plastics Holding Bhd

How Fast Is BP Plastics Holding Bhd 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. It certainly is nice to see that BP Plastics Holding Bhd has managed to grow EPS by 32% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. BP Plastics Holding Bhd's EBIT margins have actually improved by 4.4 percentage points in the last year, to reach 12%, but, on the flip side, revenue was down 4.4%. 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.

Since BP Plastics Holding Bhd is no giant, with a market capitalization of RM257m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are BP Plastics Holding Bhd 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 BP Plastics Holding Bhd insiders have a significant amount of capital invested in the stock. To be specific, they have RM88m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 34% of the company; visible skin in the game.

Does BP Plastics Holding Bhd Deserve A Spot On Your Watchlist?

You can't deny that BP Plastics Holding Bhd has grown its earnings per share at a very impressive rate. That's attractive. 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. It is worth noting though that we have found 2 warning signs for BP Plastics Holding Bhd that you need to take into consideration.

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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