Is Now The Time To Put Tri-Mode System (M) Berhad (KLSE:TRIMODE) On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Tri-Mode System (M) Berhad (KLSE:TRIMODE). 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.

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

Tri-Mode System (M) Berhad's Improving Profits

Tri-Mode System (M) Berhad has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, Tri-Mode System (M) Berhad's EPS grew from RM0.032 to RM0.064, over the previous 12 months. It's not often a company can achieve year-on-year growth of 101%. The best case scenario? That the business has hit a true inflection point.

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. While we note Tri-Mode System (M) Berhad achieved similar EBIT margins to last year, revenue grew by a solid 47% to RM140m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Tri-Mode System (M) Berhad isn't a huge company, given its market capitalisation of RM81m. That makes it extra important to check on its balance sheet strength.

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

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So we're pleased to report that Tri-Mode System (M) Berhad insiders own a meaningful share of the business. To be exact, company insiders hold 87% 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. In terms of absolute value, insiders have RM71m invested in the business, at the current share price. So there's plenty there to keep them focused!

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

Tri-Mode System (M) Berhad's earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Tri-Mode System (M) Berhad for a spot on your watchlist. We should say that we've discovered 1 warning sign for Tri-Mode System (M) Berhad that you should be aware of before investing here.

Although Tri-Mode System (M) Berhad certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.