Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Malaysia Smelting Corporation Berhad (KLSE:MSC). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
How Fast Is Malaysia Smelting Corporation Berhad Growing Its Earnings Per Share?
In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that Malaysia Smelting Corporation Berhad's EPS went from RM0.022 to RM0.13 in just one year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While revenue is looking a bit flat, the good news is EBIT margins improved by 3.6 percentage points to 9.5%, in the last twelve months. That's something to smile about.
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 Malaysia Smelting Corporation Berhad is no giant, with a market capitalization of RM860m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Malaysia Smelting Corporation Berhad Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Malaysia Smelting Corporation Berhad insiders have a significant amount of capital invested in the stock. Indeed, they hold RM61m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 7.1% of the company; visible skin in the game.
Is Malaysia Smelting Corporation Berhad Worth Keeping An Eye On?
Malaysia Smelting Corporation Berhad's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. 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 to my mind Malaysia Smelting Corporation Berhad is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. However, before you get too excited we've discovered 4 warning signs for Malaysia Smelting Corporation Berhad (3 shouldn't be ignored!) that you should be aware of.
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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