Here's Why We Think CYL Corporation Berhad (KLSE:CYL) Is Well Worth Watching

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like CYL Corporation Berhad (KLSE:CYL). 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 CYL Corporation Berhad

CYL Corporation Berhad's Improving Profits

In the last three years CYL Corporation Berhad's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, CYL Corporation Berhad's EPS soared from RM0.01 to RM0.015, in just one year. That's a commendable gain of 47%.

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. Not all of CYL Corporation Berhad's revenue last year was revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While CYL Corporation Berhad did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future my hold further growth, especially if EBIT margins can stabilize.

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.

CYL Corporation Berhad isn't a huge company, given its market capitalization of RM51m. That makes it extra important to check on its balance sheet strength.

Are CYL Corporation Berhad Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that CYL Corporation Berhad insiders own a significant number of shares certainly appeals to me. In fact, they own 82% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Of course, CYL Corporation Berhad is a very small company, with a market cap of only RM51m. So despite a large proportional holding, insiders only have RM42m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add CYL Corporation Berhad To Your Watchlist?

For growth investors like me, CYL Corporation 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. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. However, before you get too excited we've discovered 3 warning signs for CYL Corporation Berhad (1 is a bit concerning!) that you should be aware of.

Although CYL Corporation Berhad certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.