Is Now The Time To Put Teo Seng Capital Berhad (KLSE:TEOSENG) On Your Watchlist?
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Teo Seng Capital Berhad (KLSE:TEOSENG). 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.
View our latest analysis for Teo Seng Capital Berhad
In the last three years Teo Seng Capital Berhad's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Impressively, Teo Seng Capital Berhad's EPS catapulted from RM0.17 to RM0.31, over the last year. It's not often a company can achieve year-on-year growth of 80%.
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. The good news is that Teo Seng Capital Berhad is growing revenues, and EBIT margins improved by 15.5 percentage points to 27%, over the last year. Both of which are great metrics to check off for potential growth.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Teo Seng Capital Berhad isn't a huge company, given its market capitalisation of RM729m. That makes it extra important to check on its balance sheet strength.
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Teo Seng Capital Berhad insiders have a significant amount of capital invested in the stock. Indeed, they hold RM89m worth of its stock. This considerable investment should help drive long-term value in the business. That amounts to 12% of the company, demonstrating a degree of high-level alignment with shareholders.
Teo Seng Capital Berhad's earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. 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 Teo Seng Capital Berhad for a spot on your watchlist. Still, you should learn about the 2 warning signs we've spotted with Teo Seng Capital Berhad (including 1 which is concerning).
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.
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