Here's Why We Think Dyna-Mac Holdings (SGX:NO4) Is Well Worth Watching
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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Dyna-Mac Holdings (SGX:NO4), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Dyna-Mac Holdings with the means to add long-term value to shareholders.
View our latest analysis for Dyna-Mac Holdings
Dyna-Mac Holdings' Improving Profits
Over the last three years, Dyna-Mac Holdings has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Impressively, Dyna-Mac Holdings' EPS catapulted from S$0.013 to S$0.027, over the last year. It's a rarity to see 114% year-on-year growth like that. That could be a sign that the business has reached a true inflection point.
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. The music to the ears of Dyna-Mac Holdings shareholders is that EBIT margins have grown from 2.1% to 4.8% in the last 12 months and revenues are on an upwards trend as well. 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 Dyna-Mac Holdings' balance sheet strength, before getting too excited.
Are Dyna-Mac Holdings Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Dyna-Mac Holdings insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at S$40m. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 7.9% of the company; visible skin in the game.
Does Dyna-Mac Holdings Deserve A Spot On Your Watchlist?
Dyna-Mac Holdings' earnings per share growth have been climbing higher at an appreciable rate. 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 at the surface level, Dyna-Mac Holdings is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Of course, just because Dyna-Mac Holdings is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
Although Dyna-Mac Holdings certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Singaporean companies that not only boast of strong growth but have strong insider backing.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com