Stock Analysis

With EPS Growth And More, PeterLabs Holdings Berhad (KLSE:PLABS) Makes An Interesting Case

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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 currently 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.' 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.

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

Check out the opportunities and risks within the MY Pharmaceuticals industry.

PeterLabs Holdings Berhad's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. In previous twelve months, PeterLabs Holdings Berhad's EPS has risen from RM0.018 to RM0.019. That's a fair increase of 9.3%.

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 we note PeterLabs Holdings Berhad achieved similar EBIT margins to last year, revenue grew by a solid 27% to RM171m. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

KLSE:PLABS Earnings and Revenue History November 10th 2022

PeterLabs Holdings Berhad isn't a huge company, given its market capitalisation of RM55m. That makes it extra important to check on its balance sheet strength.

Are PeterLabs Holdings 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 we're pleased to report that PeterLabs Holdings Berhad insiders own a meaningful share of the business. Indeed, with a collective holding of 56%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. Valued at only RM55m PeterLabs Holdings Berhad is really small for a listed company. So this large proportion of shares owned by insiders only amounts to RM31m. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Is PeterLabs Holdings Berhad Worth Keeping An Eye On?

One positive for PeterLabs Holdings Berhad is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. Still, you should learn about the 2 warning signs we've spotted with PeterLabs Holdings Berhad.

Although PeterLabs Holdings Berhad certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Valuation is complex, but we're helping make it simple.

Find out whether PeterLabs Holdings Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.