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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Emico Holdings Berhad (KLSE:EMICO). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Emico Holdings Berhad

Emico Holdings Berhad's Improving Profits

Over the last three years, Emico Holdings Berhad has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, Emico Holdings Berhad's EPS soared from RM0.014 to RM0.018, over the last year. That's a impressive gain of 29%.

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 Emico Holdings Berhad shareholders is that EBIT margins have grown from 7.5% to 16% 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.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Emico Holdings Berhad isn't a huge company, given its market capitalisation of RM42m. That makes it extra important to check on its balance sheet strength.

Are Emico Holdings Berhad Insiders Aligned With All Shareholders?

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 those who are interested in Emico Holdings 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 61% 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. Although, with Emico Holdings Berhad being valued at RM42m, this is a small company we're talking about. So this large proportion of shares owned by insiders only amounts to RM26m. That might not be a huge sum but it should be enough to keep insiders motivated!

Is Emico Holdings Berhad Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Emico Holdings Berhad's strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Before you take the next step you should know about the 2 warning signs for Emico Holdings Berhad (1 can't be ignored!) that we have uncovered.

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.