Do Tri-Mode System (M) Berhad's (KLSE:TRIMODE) Earnings Warrant Your Attention?

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Tri-Mode System (M) Berhad (KLSE:TRIMODE). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Tri-Mode System (M) Berhad

How Fast Is Tri-Mode System (M) Berhad Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that Tri-Mode System (M) Berhad has managed to grow EPS by 22% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Tri-Mode System (M) Berhad's EBIT margins were flat over the last year, revenue grew by a solid 59% to RM133m. 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.

Tri-Mode System (M) Berhad isn't a huge company, given its market capitalization of RM86m. That makes it extra important to check on its balance sheet strength.

Are Tri-Mode System (M) Berhad Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So we're pleased to report that Tri-Mode System (M) Berhad insiders own a meaningful share of the business. Indeed, with a collective holding of 87%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. With that sort of holding, insiders have about RM75m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Is Tri-Mode System (M) Berhad Worth Keeping An Eye On?

You can't deny that Tri-Mode System (M) Berhad has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. Still, you should learn about the 3 warning signs we've spotted with Tri-Mode System (M) Berhad .

Although Tri-Mode System (M) Berhad certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.