Investors are often guided by the idea of discovering “the next big thing,” even if that means buying “story stocks” without generating revenue, let alone profit. But as Peter Lynch wrote in One step ahead on Wall Street“Risk assessments almost never pay off.” A well-financed company may incur losses for years, but at some point it must generate profits, otherwise investors will withdraw and the company will go under.
If this type of company is not your style, but you like companies that generate revenue and even profits, then you might be interested in Kawan Food Berhad (KLSE:KAWAN). While profit is not the only metric to consider when investing, it is worth identifying companies that can generate it consistently.
Check out our latest analysis for Kawan Food Berhad
How fast is Kawan Food Berhad growing?
In the short term, the market is a voting machine, but in the long term, it’s a weighing machine. So, you can expect the share price to eventually follow earnings per share (EPS). This means that EPS growth is considered a real positive by most successful long-term investors. Kawan Food Berhad has been able to grow earnings per share at 9.4% per year over three years. This growth rate is pretty good, assuming the company can sustain it.
One way to check a company’s growth is to look at how its revenue and earnings before interest and tax (EBIT) are changing. Kawan Food Berhad shareholders can take comfort in the fact that EBIT margins have increased from 9.1% to 13% and revenue is growing, which is great to see on both counts.
In the following graphic you can see the company’s sales and profit development. Click on the image to get more details.
You don’t drive with your eyes in the rearview mirror, so you might be more interested in the free Report with analyst forecasts for Kawan Food Berhad’s Future profits.
Are Kawan Food Berhad insiders aligned with all shareholders?
Many consider high insider ownership to be a strong sign of alignment between a company’s leaders and ordinary shareholders. So, those interested in Kawan Food Berhad will be happy to hear that insiders have demonstrated their faith in the company by owning a large proportion of the company’s shares. With a 36% stake in the company, insiders have a lot of influence over the direction of the share price. This should be a welcome sign for investors, as it suggests that decision makers are also influenced by their decisions. To give you an idea, the value of insider holdings in the company is estimated to be RM212 million at the current share price. That’s nothing to sneeze at!
Does Kawan Food Berhad deserve a place on your watchlist?
A key encouraging feature of Kawan Food Berhad is its growing earnings. And if that alone isn’t enough, there are also the fairly significant levels of insider ownership. This combination is very appealing. So yes, we think it’s worth keeping an eye on. However, one still has to consider the ever-present specter of investment risk. We have identified 1 warning signal with Kawan Food Berhad, and understanding this should be part of your investment process.
While choosing stocks without growing earnings and without insider buying can certainly yield results, for investors who value these key metrics, here is a carefully curated list of companies in Myanmar with promising growth potential and insider confidence.
Please note that the insider transactions discussed in this article are reportable transactions in the respective jurisdiction.
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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
