Yahoo Finance Here's Why Hume Cement Industries Berhad (KLSE:HUMEIND) Has Caught The Eye Of Investors
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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Hume Cement Industries Berhad (KLSE:HUMEIND). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for Hume Cement Industries Berhad
Hume Cement Industries Berhad's Improving Profits
Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. It's an outstanding feat for Hume Cement Industries Berhad to have grown EPS from RM0.048 to RM0.33 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
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. Hume Cement Industries Berhad shareholders can take confidence from the fact that EBIT margins are up from 6.0% to 24%, and revenue is growing. Both of which are great metrics to check off for potential growth.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Hume Cement Industries Berhad's balance sheet strength, before getting too excited.
Are Hume Cement Industries 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. Shareholders will be pleased by the fact that insiders own Hume Cement Industries Berhad shares worth a considerable sum. As a matter of fact, their holding is valued at RM105m. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 4.9%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Does Hume Cement Industries Berhad Deserve A Spot On Your Watchlist?
Hume Cement Industries Berhad's earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. 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. Based on the sum of its parts, we definitely think its worth watching Hume Cement Industries Berhad very closely. Still, you should learn about the 2 warning signs we've spotted with Hume Cement Industries Berhad.
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.
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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.
