Here's Why We Think Dyna-Mac Holdings (SGX:NO4) Is Well Worth Watching

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Dyna-Mac Holdings (SGX:NO4), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Dyna-Mac Holdings with the means to add long-term value to shareholders.

See our latest analysis for Dyna-Mac Holdings

How Fast Is Dyna-Mac Holdings Growing Its Earnings Per Share?

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that Dyna-Mac Holdings grew its EPS from S$0.0059 to S$0.019, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement. This could point to the business hitting a point of inflection.

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 good news is that Dyna-Mac Holdings is growing revenues, and EBIT margins improved by 4.0 percentage points to 3.4%, over the last year. Both of which are great metrics to check off for potential growth.

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.

Dyna-Mac Holdings isn't a huge company, given its market capitalisation of S$254m. That makes it extra important to check on its balance sheet strength.

Are Dyna-Mac Holdings Insiders Aligned With All Shareholders?

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 Dyna-Mac Holdings insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at S$20m. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 7.9% of the shares on issue for the business, an appreciable amount considering the market cap.

Is Dyna-Mac Holdings Worth Keeping An Eye On?

Dyna-Mac Holdings' earnings per share have been soaring, with growth rates sky high. 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. So based on this quick analysis, we do think it's worth considering Dyna-Mac Holdings for a spot on your watchlist. Now, you could try to make up your mind on Dyna-Mac Holdings by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

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 SG 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.