Do Mikro MSC Berhad's (KLSE:MIKROMB) Earnings Warrant Your Attention?

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Mikro MSC Berhad (KLSE:MIKROMB), which has not only revenues, but also profits. 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.

View our latest analysis for Mikro MSC Berhad

How Fast Is Mikro MSC Berhad Growing Its Earnings Per Share?

Mikro MSC Berhad has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Mikro MSC Berhad's EPS grew from RM0.012 to RM0.025, over the previous 12 months. It's not often a company can achieve year-on-year growth of 122%.

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. Mikro MSC Berhad's EBIT margins have actually improved by 32.1 percentage points in the last year, to reach 46%, but, on the flip side, revenue was down 9.4%. That falls short of ideal.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Mikro MSC Berhad isn't a huge company, given its market capitalisation of RM220m. That makes it extra important to check on its balance sheet strength.

Are Mikro MSC Berhad Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in Mikro MSC Berhad will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 56% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. In terms of absolute value, insiders have RM123m invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Mikro MSC Berhad with market caps under RM938m is about RM493k.

The CEO of Mikro MSC Berhad was paid just RM29k in total compensation for the year ending June 2023. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Is Mikro MSC Berhad Worth Keeping An Eye On?

Mikro MSC Berhad's earnings have taken off in quite an impressive fashion. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The strong EPS improvement suggests the businesses is humming along. Big growth can make big winners, so the writing on the wall tells us that Mikro MSC Berhad is worth considering carefully. What about risks? Every company has them, and we've spotted 3 warning signs for Mikro MSC Berhad (of which 2 don't sit too well with us!) 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.