I Ran A Stock Scan For Earnings Growth And D'nonce Technology Bhd (KLSE:DNONCE) Passed With Ease

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 Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like D'nonce Technology Bhd (KLSE:DNONCE). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.

Check out our latest analysis for D'nonce Technology Bhd

How Fast Is D'nonce Technology Bhd Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Impressively, D'nonce Technology Bhd has grown EPS by 24% per year, compound, in the last 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. The good news is that D'nonce Technology Bhd is growing revenues, and EBIT margins improved by 7.0 percentage points to 9.6%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

Since D'nonce Technology Bhd is no giant, with a market capitalization of RM183m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are D'nonce Technology 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. As a result, I'm encouraged by the fact that insiders own D'nonce Technology Bhd shares worth a considerable sum. To be specific, they have RM58m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 32% of the company, demonstrating a degree of high-level alignment with shareholders.

Is D'nonce Technology Bhd Worth Keeping An Eye On?

You can't deny that D'nonce Technology Bhd has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. 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. You still need to take note of risks, for example - D'nonce Technology Bhd has 2 warning signs we think you should be aware of.

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. 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.
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