With EPS Growth And More, Malayan Cement Berhad (KLSE:MCEMENT) Makes An Interesting Case

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Malayan Cement Berhad (KLSE:MCEMENT). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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Malayan Cement Berhad's Improving Profits

Malayan Cement 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. So it would be better to isolate the growth rate over the last year for our analysis. To the delight of shareholders, Malayan Cement Berhad's EPS soared from RM0.33 to RM0.50, over the last year. That's a fantastic gain of 52%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. This approach makes Malayan Cement Berhad look pretty good, on balance; although revenue is flattish, EBIT margins improved from 15% to 25% in the last year. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

View our latest analysis for Malayan Cement Berhad

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Malayan Cement Berhad.

Are Malayan Cement Berhad Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Malayan Cement Berhad followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they hold RM110m worth of its stock. This considerable investment should help drive long-term value in the business. Despite being just 1.2% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Malayan Cement Berhad Deserve A Spot On Your Watchlist?

You can't deny that Malayan Cement Berhad has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Malayan Cement Berhad's continuing strength. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Now, you could try to make up your mind on Malayan Cement Berhad by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Malaysian companies which have demonstrated growth backed by significant insider holdings.

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.