If EPS Growth Is Important To You, Sasbadi Holdings Berhad (KLSE:SASBADI) Presents An Opportunity

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Sasbadi Holdings Berhad (KLSE:SASBADI). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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Sasbadi Holdings Berhad's Improving Profits

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. Which is why EPS growth is looked upon so favourably. Commendations have to be given in seeing that Sasbadi Holdings Berhad grew its EPS from RM0.0051 to RM0.026, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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. The good news is that Sasbadi Holdings Berhad is growing revenues, and EBIT margins improved by 8.8 percentage points to 13%, over the last year. That's great to see, on both counts.

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.

Check out our latest analysis for Sasbadi Holdings Berhad

Since Sasbadi Holdings Berhad is no giant, with a market capitalisation of RM68m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Sasbadi Holdings Berhad Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So those who are interested in Sasbadi Holdings Berhad will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Actually, with 42% of the company to their names, insiders are profoundly invested in the business. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Of course, Sasbadi Holdings Berhad is a very small company, with a market cap of only RM68m. So despite a large proportional holding, insiders only have RM29m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Sasbadi Holdings Berhad with market caps under RM840m is about RM456k.

Sasbadi Holdings Berhad's CEO only received compensation totalling RM40k in the year to August 2024. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Sasbadi Holdings Berhad Deserve A Spot On Your Watchlist?

Sasbadi Holdings Berhad's earnings have taken off in quite an impressive fashion. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The sharp increase in earnings could signal good business momentum. Sasbadi Holdings Berhad certainly ticks a few boxes, so we think it's probably well worth further consideration. We don't want to rain on the parade too much, but we did also find 2 warning signs for Sasbadi Holdings Berhad that you need to be mindful of.

Although Sasbadi Holdings Berhad certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Malaysian companies that not only boast of strong growth but have strong insider backing.

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.