Here's Why Mesiniaga Berhad (KLSE:MSNIAGA) Has Caught The Eye Of Investors

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Mesiniaga Berhad (KLSE:MSNIAGA). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Mesiniaga Berhad

Mesiniaga Berhad's Improving Profits

In the last three years Mesiniaga Berhad's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that Mesiniaga Berhad's EPS has grown from RM0.096 to RM0.11 over twelve months. There's little doubt shareholders would be happy with that 16% gain.

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. Mesiniaga Berhad's EBIT margins are flat but, worryingly, its revenue is actually down. Suffice it to say that is not a great sign of growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since Mesiniaga Berhad is no giant, with a market capitalisation of RM95m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Mesiniaga 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 as you can imagine, the fact that Mesiniaga Berhad insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 51%, 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 RM95m Mesiniaga Berhad is really small for a listed company. So this large proportion of shares owned by insiders only amounts to RM49m. That might not be a huge sum but it should be enough to keep insiders motivated!

Is Mesiniaga Berhad Worth Keeping An Eye On?

One positive for Mesiniaga Berhad is that it is growing EPS. That's nice to see. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. These two factors are a huge highlight for the company which should be a strong contender your watchlists. Still, you should learn about the 1 warning sign we've spotted with Mesiniaga Berhad.

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.