Do Menang Corporation (M) Berhad's (KLSE:MENANG) 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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Menang Corporation (M) Berhad (KLSE:MENANG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Menang Corporation (M) Berhad with the means to add long-term value to shareholders.

Check out our latest analysis for Menang Corporation (M) Berhad

Menang Corporation (M) Berhad's Improving Profits

Over the last three years, Menang Corporation (M) Berhad has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Menang Corporation (M) Berhad's EPS skyrocketed from RM0.015 to RM0.024, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 61%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Our analysis has highlighted that Menang Corporation (M) Berhad's revenue from operations did not account for all of their revenue last year, so our analysis of its margins might not accurately reflect the underlying business. Menang Corporation (M) Berhad's EBIT margins have fallen over the last twelve months, but the flat revenue sends a message of stability. That doesn't inspire a great deal of confidence.

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.

Menang Corporation (M) Berhad isn't a huge company, given its market capitalisation of RM253m. That makes it extra important to check on its balance sheet strength.

Are Menang Corporation (M) Berhad Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So those who are interested in Menang Corporation (M) Berhad will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 72% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. To give you an idea, the value of insiders' holdings in the business are valued at RM182m at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations under RM898m, like Menang Corporation (M) Berhad, the median CEO pay is around RM498k.

The Menang Corporation (M) Berhad CEO received total compensation of only RM16k in the year to June 2021. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Menang Corporation (M) Berhad Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Menang Corporation (M) Berhad's strong EPS growth. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. Everyone has their own preferences when it comes to investing but it definitely makes Menang Corporation (M) Berhad look rather interesting indeed. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Menang Corporation (M) Berhad (at least 2 which are a bit concerning) , and understanding these 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 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.