Is Now The Time To Put BP Plastics Holding Bhd (KLSE:BPPLAS) On Your Watchlist?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone 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.

So if you're like me, you might be more interested in profitable, growing companies, like BP Plastics Holding Bhd (KLSE:BPPLAS). 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 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 30% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. BP Plastics Holding Bhd's EBIT margins have actually improved by 4.0 percentage points in the last year, to reach 11%, but, on the flip side, revenue was down 5.6%. That's not ideal.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

BP Plastics Holding Bhd isn't a huge company, given its market capitalization of RM272m. That makes it extra important to check on its balance sheet strength.

Are BP Plastics Holding Bhd 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 BP Plastics Holding Bhd insiders have a significant amount of capital invested in the stock. To be specific, they have RM93m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 34% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add BP Plastics Holding Bhd To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about BP Plastics Holding Bhd's strong EPS growth. 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. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. Even so, be aware that BP Plastics Holding Bhd is showing 2 warning signs in our investment analysis , you should know about...

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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