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 IHH Healthcare Berhad (KLSE:IHH). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide IHH Healthcare Berhad with the means to add long-term value to shareholders.
Check out our latest analysis for IHH Healthcare Berhad
How Fast Is IHH Healthcare Berhad Growing Its Earnings Per Share?
In the last three years IHH Healthcare Berhad’s earnings per share took off; so much so that it’s a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, IHH Healthcare Berhad’s EPS shot from RM0.17 to RM0.34, over the last year. It’s not often a company can achieve year-on-year growth of 97%.
It’s often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company’s growth. The music to the ears of IHH Healthcare Berhad shareholders is that EBIT margins have grown from 15% to 20% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.
The chart below shows how the company’s bottom and top lines have progressed over time. For finer detail, click on the image.
While we live in the present moment, there’s little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for IHH Healthcare Berhad?
Are IHH Healthcare Berhad Insiders Aligned With All Shareholders?
Owing to the size of IHH Healthcare Berhad, we wouldn’t expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. To be specific, they have RM94m worth of shares. That’s a lot of money, and no small incentive to work hard. While their ownership only accounts for 0.2%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Is IHH Healthcare Berhad Worth Keeping An Eye On?
IHH Healthcare Berhad’s earnings have taken off in quite an impressive fashion. 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. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching IHH Healthcare Berhad very closely. It is worth noting though that we have found 1 warning sign for IHH Healthcare Berhad that you need to take into consideration.
There’s always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Malaysian companies which have demonstrated growth backed by recent insider purchases.
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.
