DIEM BONAM, OMNES!
For newcomers, it may seem like a good idea (and an exciting prospect) to purchase a company that has a compelling tale to tell investors, even if it has no revenue or profit track record. However, the reality is that when a business loses money year after year for an extended period of time, its investors will typically accept a part of those losses.
If, on the other hand, you prefer companies that generate income and even profit, Three-A Resources Berhad may be of interest (KLSE:3A). Now, I'm not suggesting that the stock is particularly inexpensive at the moment; nonetheless, I can't shake an appreciation for the business's profitability. In comparison, loss-making businesses behave similarly to a sponge for cash - except that, unlike a sponge, they do not necessarily yield something when squeezed.
Three-A Resources Berhad's Earnings Per Share Are Growing at a Rapid Pace
Even modest earnings per share (EPS) growth can add significant value if it is sustained year after year. As a result, it's unsurprising that some investors prefer to invest in prosperous enterprises. Three-A Resources Berhad's EPS jumped from RM0.063 to RM0.083 during the last year, similar to a falcon taking flight. That is a commendable 30% increase.
I like to look at earnings before interest and taxes (EBIT) margins in addition to revenue growth to get a sense of the company's growth quality. Three-A Resources Berhad maintained consistent EBIT margins over the last year, despite a 12 percent increase in revenue to RM487 million. That is advancement.
Are the Insiders of Three-A Resources Berhad Aligned With All Shareholders?
Personally, I want to see a large percentage of insider ownership in a company, as this indicates that it will be run in the shareholders' best interests. As a result, we are glad to disclose that insiders of Three-A Resources Berhad hold a sizable portion of the business. Indeed, because they own 51% of the company, they will experience the same highs and lows as ordinary shareholders. This leads me to believe they will be incentivized to plan for the long term, which is something I admire. Insiders have invested RM270 million in the business in absolute terms, based on the current share price. That should be sufficient to keep them focused on shareholder value creation!
Is Three-A Resources Berhad A Stock Worth Adding To Your Watchlist?
Given my conviction that share price should follow earnings per share, you can imagine my reaction to Three-A Resources Berhad's impressive earnings per share rise. Additionally, the high amount of insider ownership excites me and indicates that I am not alone in appreciating the earnings increase. Rapid growth and self-assured insiders should be sufficient to justify additional research. Thus, the response is that I believe this is a worthwhile stock to watch.
WELL, RM1.30 JUST AROUND THE CORNER....