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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

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). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Tri-Mode System (M) Berhad with the means to add long-term value to shareholders.

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

How Fast Is Tri-Mode System (M) Berhad Growing Its Earnings Per Share?

Over the last three years, Tri-Mode System (M) Berhad has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. 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 RM0.067, over the previous 12 months. It's not often a company can achieve year-on-year growth of 109%.

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. Tri-Mode System (M) Berhad maintained stable EBIT margins over the last year, all while growing revenue 24% to RM142m. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Tri-Mode System (M) Berhad isn't a huge company, given its market capitalisation of RM73m. That makes it extra important to check on its balance sheet strength.

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

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. 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. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Of course, Tri-Mode System (M) Berhad is a very small company, with a market cap of only RM73m. So this large proportion of shares owned by insiders only amounts to RM64m. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

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

Tri-Mode System (M) Berhad's earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Tri-Mode System (M) Berhad for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Tri-Mode System (M) Berhad you should be aware of.

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.