Do Avaland Berhad's (KLSE:AVALAND) Earnings Warrant Your Attention?

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.

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 Avaland Berhad (KLSE:AVALAND). 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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How Fast Is Avaland Berhad Growing Its Earnings Per Share?

Avaland 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. Thus, it makes sense to focus on more recent growth rates, instead. To the delight of shareholders, Avaland Berhad's EPS soared from RM0.045 to RM0.068, over the last year. That's a impressive gain of 50%.

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. The music to the ears of Avaland Berhad shareholders is that EBIT margins have grown from 15% to 17% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

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.

Check out our latest analysis for Avaland Berhad

Since Avaland Berhad is no giant, with a market capitalisation of RM364m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Avaland Berhad Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalisations under RM898m, like Avaland Berhad, the median CEO pay is around RM478k.

Avaland Berhad's CEO only received compensation totalling RM70k in the year to December 2023. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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. It can also be a sign of good governance, more generally.

Is Avaland Berhad Worth Keeping An Eye On?

You can't deny that Avaland Berhad has grown its earnings per share at a very impressive rate. That's attractive. With swiftly growing earnings, the best days may still be to come, and the modest CEO pay suggests the company is careful with cash. So this stock is well worth an addition to your watchlist as it has the potential to provide great value to shareholders. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Avaland Berhad , and understanding this should be part of your investment process.

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.