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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
So if this idea of high risk and high reward doesn’t suit, you might be more interested in profitable, growing companies, like Hengyuan Refining Company Berhad (KLSE:HENGYUAN). 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.
Check out our latest analysis for Hengyuan Refining Company Berhad
Hengyuan Refining Company Berhad’s Improving Profits
Hengyuan Refining Company Berhad has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn’t be a fair assessment of the company’s future. As a result, we’ll zoom in on growth over the last year, instead. Impressively, Hengyuan Refining Company Berhad’s EPS catapulted from RM0.94 to RM2.80, over the last year. Year on year growth of 197% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.
It’s often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company’s growth. The good news is that Hengyuan Refining Company Berhad is growing revenues, and EBIT margins improved by 2.0 percentage points to 6.0%, over the last year. That’s great to see, on both counts.
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.
Hengyuan Refining Company Berhad isn’t a huge company, given its market capitalisation of RM1.3b. That makes it extra important to check on its balance sheet strength.
Are Hengyuan Refining Company 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. Hengyuan Refining Company 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. As a matter of fact, their holding is valued at RM87m. This considerable investment should help drive long-term value in the business. That amounts to 6.4% of the company, demonstrating a degree of high-level alignment with shareholders.
Does Hengyuan Refining Company Berhad Deserve A Spot On Your Watchlist?
Hengyuan Refining Company Berhad’s earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it’s worth considering Hengyuan Refining Company Berhad for a spot on your watchlist. However, before you get too excited we’ve discovered 5 warning signs for Hengyuan Refining Company Berhad (3 are concerning!) 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.
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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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