Do Tenaga Nasional Berhad's (KLSE:TENAGA) Earnings Warrant Your Attention?

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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Tenaga Nasional Berhad (KLSE:TENAGA). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Tenaga Nasional Berhad's Earnings Per Share Are Growing

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) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Tenaga Nasional Berhad grew its EPS by 7.4% per year. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of Tenaga Nasional Berhad's revenue last year was revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While revenue is looking a bit flat, the good news is EBIT margins improved by 3.1 percentage points to 14%, in the last twelve months. That's something to smile about.

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

See our latest analysis for Tenaga Nasional Berhad

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Tenaga Nasional Berhad.

Are Tenaga Nasional Berhad Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalisations over RM33b, like Tenaga Nasional Berhad, the median CEO pay is around RM6.0m.

Tenaga Nasional Berhad offered total compensation worth RM3.1m to its CEO in the year to December 2024. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Is Tenaga Nasional Berhad Worth Keeping An Eye On?

As previously touched on, Tenaga Nasional Berhad is a growing business, which is encouraging. On top of that, our faith in the board of directors is strengthened by the fact of the reasonable CEO pay. So all in all Tenaga Nasional Berhad is worthy at least considering for your watchlist. We should say that we've discovered 2 warning signs for Tenaga Nasional Berhad (1 shouldn't be ignored!) that you should be aware of before investing here.

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.