We Ran A Stock Scan For Earnings Growth And Tanco Holdings Berhad (KLSE:TANCO) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Tanco Holdings Berhad (KLSE:TANCO). 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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Tanco Holdings Berhad's Improving Profits

Tanco Holdings 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. Tanco Holdings Berhad's EPS skyrocketed from RM0.0044 to RM0.0061, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 40%.

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 Tanco Holdings Berhad remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 66% to RM171m. That's progress.

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.

See our latest analysis for Tanco Holdings Berhad

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Tanco Holdings Berhad's balance sheet strength, before getting too excited.

Are Tanco Holdings Berhad Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Tanco Holdings Berhad insiders have a significant amount of capital invested in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at RM989m. That equates to 23% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Should You Add Tanco Holdings Berhad To Your Watchlist?

You can't deny that Tanco Holdings Berhad has grown its earnings per share at a very impressive rate. That's attractive. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Of course, profit growth is one thing but it's even better if Tanco Holdings Berhad is receiving high returns on equity, since that should imply it can keep growing without much need for capital. Click on this link to see how it is faring against the average in its industry.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in MY with promising growth potential and insider confidence.

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.