Should You Be Adding Hiap Teck Venture Berhad (KLSE:HIAPTEK) To Your Watchlist Today?

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. 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 Hiap Teck Venture Berhad (KLSE:HIAPTEK). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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 Hiap Teck Venture Berhad

Hiap Teck Venture Berhad's Improving Profits

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. You can imagine, then, that it almost knocked my socks off when I realized that Hiap Teck Venture Berhad grew its EPS from RM0.011 to RM0.13, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Hiap Teck Venture Berhad shareholders can take confidence from the fact that EBIT margins are up from 2.2% to 15%, and revenue is growing. That's great to see, on both counts.

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.

Hiap Teck Venture Berhad isn't a huge company, given its market capitalization of RM945m. That makes it extra important to check on its balance sheet strength.

Are Hiap Teck Venture Berhad 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 Hiap Teck Venture Berhad insiders have a significant amount of capital invested in the stock. Indeed, they hold RM90m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 9.5% of the company; visible skin in the game.

Should You Add Hiap Teck Venture Berhad To Your Watchlist?

Hiap Teck Venture Berhad's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Hiap Teck Venture Berhad for a spot on your watchlist. Even so, be aware that Hiap Teck Venture Berhad is showing 3 warning signs in our investment analysis , and 1 of those is a bit concerning...

Although Hiap Teck Venture 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.