Here's Why Press Metal Aluminium Holdings Berhad (KLSE:PMETAL) Has Caught The Eye Of Investors

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.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 Press Metal Aluminium Holdings Berhad (KLSE:PMETAL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Press Metal Aluminium Holdings Berhad with the means to add long-term value to shareholders.

See our latest analysis for Press Metal Aluminium Holdings Berhad

How Quickly Is Press Metal Aluminium Holdings Berhad Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Press Metal Aluminium Holdings Berhad has managed to grow EPS by 26% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Press Metal Aluminium Holdings Berhad remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 65% to RM13b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Press Metal Aluminium Holdings Berhad's forecast profits?

Are Press Metal Aluminium Holdings Berhad Insiders Aligned With All Shareholders?

Owing to the size of Press Metal Aluminium Holdings Berhad, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at RM9.3b. That equates to 26% of the company, making insiders powerful and aligned with other shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Press Metal Aluminium Holdings Berhad with market caps between RM18b and RM53b is about RM3.5m.

The Press Metal Aluminium Holdings Berhad CEO received RM2.5m in compensation for the year ending December 2021. That is actually below the median for CEO's of similarly sized companies. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Press Metal Aluminium Holdings Berhad Worth Keeping An Eye On?

For growth investors, Press Metal Aluminium Holdings Berhad's raw rate of earnings growth is a beacon in the night. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. The overarching message here is that Press Metal Aluminium Holdings Berhad has underlying strengths that make it worth a look at. Before you take the next step you should know about the 3 warning signs for Press Metal Aluminium Holdings Berhad (1 is concerning!) that we have uncovered.

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 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. 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.