We Ran A Stock Scan For Earnings Growth And Harn Len Corporation Bhd (KLSE:HARNLEN) Passed With Ease

Investors are often guided by the idea of discovering ‘the next big thing’, even if that means buying ‘story stocks’ without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital – so investors should be cautious that they’re not throwing good money after bad.

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 Harn Len Corporation Bhd (KLSE:HARNLEN). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Harn Len Corporation Bhd’s shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 47%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

One way to double-check a company’s growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The music to the ears of Harn Len Corporation Bhd shareholders is that EBIT margins have grown from 6.4% to 19% in the last 12 months and revenues are on an upwards trend as well. That’s great to see, on both counts.

The chart below shows how the company’s bottom and top lines have progressed over time. For finer detail, click on the image.

See our latest analysis for Harn Len Corporation Bhd

Since Harn Len Corporation Bhd is no giant, with a market capitalisation of RM346m, you should definitely check its cash and debt before getting too excited about its prospects.

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there’s less of a probability in a sudden sell-off that would impact the share price. So we’re pleased to report that Harn Len Corporation Bhd insiders own a meaningful share of the business. In fact, they own 38% of the shares, making insiders a very influential shareholder group. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. With that sort of holding, insiders have about RM131m riding on the stock, at current prices. So there’s plenty there to keep them focused!

Harn Len Corporation Bhd’s earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. 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. So at the surface level, Harn Len Corporation Bhd is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. We don’t want to rain on the parade too much, but we did also find 3 warning signs for Harn Len Corporation Bhd (1 is a bit concerning!) that you need to be mindful of.

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.