Does Hil Industries Berhad (KLSE:HIL) Deserve A Spot On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Hil Industries Berhad (KLSE:HIL). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Hil Industries Berhad

How Fast Is Hil Industries Berhad 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. Over the last three years, Hil Industries Berhad has grown EPS by 13% per year. That's a pretty good rate, if the company can sustain it.

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. Unfortunately, Hil Industries Berhad's revenue dropped 5.4% last year, but the silver lining is that EBIT margins improved from 16% to 18%. That falls short of ideal.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

Hil Industries Berhad isn't a huge company, given its market capitalization of RM352m. That makes it extra important to check on its balance sheet strength.

Are Hil Industries Berhad Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Hil Industries Berhad insiders own a significant number of shares certainly appeals to me. Actually, with 36% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have RM126m invested in the business, using the current share price. That's nothing to sneeze at!

Is Hil Industries Berhad Worth Keeping An Eye On?

One important encouraging feature of Hil Industries Berhad is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Even so, be aware that Hil Industries Berhad is showing 1 warning sign in our investment analysis , you should know about...

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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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