Stock Analysis

Does Eonmetall Group Berhad (KLSE:EMETALL) Deserve A Spot On Your Watchlist?

KLSE:EMETALL
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Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Eonmetall Group Berhad (KLSE:EMETALL). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Eonmetall Group Berhad

How Fast Is Eonmetall Group Berhad Growing Its Earnings Per Share?

Eonmetall Group Berhad has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Eonmetall Group Berhad's EPS skyrocketed from RM0.079 to RM0.13, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 60%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The music to the ears of Eonmetall Group Berhad shareholders is that EBIT margins have grown from 9.8% to 14% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

earnings-and-revenue-history
KLSE:EMETALL Earnings and Revenue History October 19th 2022

Since Eonmetall Group Berhad is no giant, with a market capitalisation of RM201m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Eonmetall Group Berhad Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. The median total compensation for CEOs of companies similar in size to Eonmetall Group Berhad, with market caps under RM944m is around RM497k.

The Eonmetall Group Berhad CEO received total compensation of only RM42k in the year to December 2021. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Eonmetall Group Berhad To Your Watchlist?

For growth investors, Eonmetall Group Berhad's raw rate of earnings growth is a beacon in the night. With swiftly growing earnings, the best days may still be to come, and the modest CEO pay suggests the company is careful with cash. Based on these factors, this stock may well deserve a spot on your watchlist, or even a little further research. It's still necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with Eonmetall Group Berhad (at least 2 which can't be ignored) , and understanding them should be part of your investment process.

Although Eonmetall Group Berhad certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.

Valuation is complex, but we're helping make it simple.

Find out whether Eonmetall Group Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.