Is Now The Time To Put Azeus Systems Holdings (SGX:BBW) On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. 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 Azeus Systems Holdings (SGX:BBW). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Azeus Systems Holdings

Azeus Systems Holdings's Improving Profits

Over the last three years, Azeus Systems Holdings has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, Azeus Systems Holdings's EPS shot from HK$0.42 to HK$0.79, over the last year. Year on year growth of 87% is certainly a sight to behold.

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. It seems Azeus Systems Holdings is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not bad, but it doesn't point to ongoing future growth, either.

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.

Since Azeus Systems Holdings is no giant, with a market capitalization of S$60m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Azeus Systems Holdings 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 Azeus Systems Holdings insiders own a significant number of shares certainly appeals to me. In fact, they own 36% of the shares, making insiders a very influential shareholder group. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. In terms of absolute value, insiders have HK$22m invested in the business, using the current share price. That's nothing to sneeze at!

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like Azeus Systems Holdings with market caps under HK$1.6b is about HK$3.0m.

The CEO of Azeus Systems Holdings only received HK$618k in total compensation for the year ending . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. While the level of CEO compensation isn't a huge factor in my view of the company, 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.

Should You Add Azeus Systems Holdings To Your Watchlist?

Azeus Systems Holdings's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The strong EPS improvement suggests the businesses is humming along. Big growth can make big winners, so I do think Azeus Systems Holdings is worth considering carefully. What about risks? Every company has them, and we've spotted 2 warning signs for Azeus Systems Holdings you should know about.

Although Azeus Systems Holdings 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. 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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