Yahoo Finance If EPS Growth Is Important To You, UMS Holdings Berhad (KLSE:UMS) Presents An Opportunity
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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like UMS Holdings Berhad (KLSE:UMS). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Check out our latest analysis for UMS Holdings Berhad
How Fast Is UMS Holdings Berhad Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Recognition must be given to the that UMS Holdings Berhad has grown EPS by 45% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Despite consistency in EBIT margins year on year, UMS Holdings Berhad has actually recorded a dip in revenue. This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
UMS Holdings Berhad isn't a huge company, given its market capitalisation of RM89m. That makes it extra important to check on its balance sheet strength.
Are UMS Holdings Berhad Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that UMS Holdings Berhad insiders own a meaningful share of the business. Indeed, with a collective holding of 58%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. Of course, UMS Holdings Berhad is a very small company, with a market cap of only RM89m. So this large proportion of shares owned by insiders only amounts to RM52m. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.
While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to UMS Holdings Berhad, with market caps under RM953m is around RM498k.
UMS Holdings Berhad's CEO only received compensation totalling RM8.1k in the year to September 2022. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Is UMS Holdings Berhad Worth Keeping An Eye On?
UMS Holdings Berhad's earnings per share have been soaring, with growth rates sky high. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The strong EPS improvement suggests the businesses is humming along. UMS Holdings Berhad certainly ticks a few boxes, so we think it's probably well worth further consideration. Before you take the next step you should know about the 3 warning signs for UMS Holdings Berhad (1 is significant!) that we have uncovered.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in MY with promising growth potential and insider confidence.
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.
