Do APM Automotive Holdings Berhad’s (KLSE:APM) Earnings Warrant Your Attention?

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. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 APM Automotive Holdings Berhad (KLSE:APM). 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.

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If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that APM Automotive Holdings Berhad has managed to grow EPS by 35% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. While we note APM Automotive Holdings Berhad achieved similar EBIT margins to last year, revenue grew by a solid 8.6% to RM2.1b. That’s encouraging news for the company!

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.

View our latest analysis for APM Automotive Holdings Berhad

Since APM Automotive Holdings Berhad is no giant, with a market capitalisation of RM631m, you should definitely check its cash and debt before getting too excited about its prospects.

It’s pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that APM Automotive Holdings Berhad insiders have a significant amount of capital invested in the stock. To be specific, they have RM163m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 26% of the company, demonstrating a degree of high-level alignment with shareholders.

If you believe that share price follows earnings per share you should definitely be delving further into APM Automotive Holdings Berhad’s strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in APM Automotive Holdings Berhad’s continuing strength. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Even so, be aware that APM Automotive Holdings Berhad is showing 1 warning sign in our investment analysis , you should know about…

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.