Is Now The Time To Put OpenSys (M) Berhad (KLSE:OPENSYS) On Your Watchlist?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in OpenSys (M) Berhad (KLSE:OPENSYS). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for OpenSys (M) Berhad

How Quickly Is OpenSys (M) Berhad Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. I, for one, am blown away by the fact that OpenSys (M) Berhad has grown EPS by 38% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

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. Unfortunately, OpenSys (M) Berhad's revenue dropped 6.6% last year, but the silver lining is that EBIT margins improved from 13% to 17%. That falls short of ideal.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

OpenSys (M) Berhad isn't a huge company, given its market capitalization of RM237m. That makes it extra important to check on its balance sheet strength.

Are OpenSys (M) 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 OpenSys (M) Berhad insiders own a significant number of shares certainly appeals to me. In fact, they own 46% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. With that sort of holding, insiders have about RM110m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Is OpenSys (M) Berhad Worth Keeping An Eye On?

OpenSys (M) Berhad's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering OpenSys (M) Berhad for a spot on your watchlist. However, before you get too excited we've discovered 3 warning signs for OpenSys (M) Berhad that you should be aware of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like 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. 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.
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