If EPS Growth Is Important To You, IRIS Corporation Berhad (KLSE:IRIS) Presents An Opportunity

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.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like IRIS Corporation Berhad (KLSE:IRIS). 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.

See our latest analysis for IRIS Corporation Berhad

How Fast Is IRIS Corporation Berhad Growing Its Earnings Per Share?

In the last three years IRIS Corporation 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. As a result, we'll zoom in on growth over the last year, instead. IRIS Corporation Berhad's EPS shot up from RM0.027 to RM0.04; a result that's bound to keep shareholders happy. That's a commendable gain of 47%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note IRIS Corporation Berhad achieved similar EBIT margins to last year, revenue grew by a solid 6.4% to RM371m. That's encouraging news for the company!

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.

IRIS Corporation Berhad isn't a huge company, given its market capitalisation of RM416m. That makes it extra important to check on its balance sheet strength.

Are IRIS Corporation Berhad Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that IRIS Corporation Berhad insiders have a significant amount of capital invested in the stock. Indeed, they hold RM106m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 25% of the shares on issue for the business, an appreciable amount considering the market cap.

Does IRIS Corporation Berhad Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into IRIS Corporation Berhad's strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in IRIS Corporation Berhad's continuing strength. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. You still need to take note of risks, for example - IRIS Corporation Berhad has 2 warning signs we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com