Like a puppy chasing its tail, some new investors are often looking for “the next big thing,” even if that means buying “history stocks” with no revenue, let alone profit. Unfortunately, high-risk investments are often unlikely to ever return, and many investors pay a price to learn their lesson.
Contrary to all that, I prefer to spend time on companies like Frontken Corporation Berhad (KLSE:FRONTKN), which not only generates revenue, but also profits. Now, I’m not saying the stock is necessarily undervalued today; but I can’t help but appreciate the profitability of the business itself. In comparison, loss-making companies act like a sponge for capital – but unlike such a sponge, they don’t always produce something when pressed.
Check out our latest analysis for Frontken Corporation Berhad
How fast is Frontken Corporation Berhad growing?
If a company can keep increasing its earnings per share (EPS) long enough, its stock price will eventually follow. Therefore, there are many investors who like to buy shares in companies that grow EPS. It is certainly pleasing to see that Frontken Corporation Berhad managed to increase EPS by 31% pa over three years. It is therefore not surprising to see the company trading on a very high multiple of (past) earnings.
I like to take a look at earnings before interest and tax margins (EBIT), as well as revenue growth, to get another view of the quality of the company’s growth. While we note that Frontken Corporation Berhad’s EBIT margins have remained stable over the past year, revenues have increased by 21% to RM430 million. This is a real plus point.
You can check the company’s revenue and profit growth trend in the table below. Click on the table to see the exact numbers.
You don’t drive with your eyes on the rearview mirror, so you might be more interested in that free report showing analyst forecasts for Frontken Corporation Berhad’s future profits.
Are Frontken Corporation Berhad insiders aligned with all shareholders?
I like that business leaders have some skin in the game, so to speak, because it increases the alignment of incentives between the people running the business and its true owners. So it’s good to see that Frontken Corporation Berhad insiders have a lot of capital invested in the stock. Indeed, they have invested a mountain of glittering wealth there, currently valued at RM1.1 billion. This equates to 21% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.
Should you add Frontken Corporation Berhad to your watchlist?
Since I think share price tracks earnings per share, you can easily imagine how I feel about Frontken Corporation Berhad’s strong EPS growth. I think EPS growth is something to brag about, and it doesn’t surprise me that insiders are holding a sizable amount of stock. Rapid growth and confident insiders should be enough to warrant further research. So the answer is that I think it’s a good stock to follow. Another important measure of company quality that is not covered here is return on equity (ROE). Click this link to see how Frontken Corporation Berhad stacks up against its industry peers, when it comes to ROE.
You can invest in the company of your choice. But if you’d rather focus on stocks that have been insider buying, here’s a list of companies that have been insider buying over the past three months.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.