It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in MNRB Holdings Berhad (KLSE:MNRB). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for MNRB Holdings Berhad
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, MNRB Holdings Berhad has achieved impressive annual EPS growth of 41%, compound, 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. Our analysis has highlighted that MNRB Holdings Berhad's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. MNRB Holdings Berhad's EBIT margins have actually improved by 17.2 percentage points in the last year, to reach 27%, but, on the flip side, revenue was down 3.2%. That's not a good look.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
While profitability drives the upside, prudent investors always check the balance sheet, too.
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 MNRB Holdings Berhad shares worth a considerable sum. With a whopping RM243m worth of shares as a group, insiders have plenty riding on the company's success. Amounting to 14% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.