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 currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 SAM Engineering & Equipment (M) Berhad (KLSE:SAM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide SAM Engineering & Equipment (M) Berhad with the means to add long-term value to shareholders.
View our latest analysis for SAM Engineering & Equipment (M) Berhad
How Fast Is SAM Engineering & Equipment (M) Berhad Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years SAM Engineering & Equipment (M) Berhad grew its EPS by 6.1% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.
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. SAM Engineering & Equipment (M) Berhad maintained stable EBIT margins over the last year, all while growing revenue 60% to RM1.5b. 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.
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are SAM Engineering & Equipment (M) Berhad Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. SAM Engineering & Equipment (M) Berhad followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have RM61m worth of shares. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 2.3%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Does SAM Engineering & Equipment (M) Berhad Deserve A Spot On Your Watchlist?
One important encouraging feature of SAM Engineering & Equipment (M) Berhad is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. However, before you get too excited we've discovered 1 warning sign for SAM Engineering & Equipment (M) Berhad that you should be aware of.
The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
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.
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