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The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street‘Long shots almost never pay off.’ While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like Tiong Nam Logistics Holdings Berhad (KLSE:TNLOGIS), 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 Tiong Nam Logistics Holdings Berhad
The market is a voting machine in the short term, but a weighing machine in the long term, so you’d expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Tiong Nam Logistics Holdings Berhad’s shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 45%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it’s a great way for a company to maintain a competitive advantage in the market. The music to the ears of Tiong Nam Logistics Holdings Berhad shareholders is that EBIT margins have grown from 13% 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.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Tiong Nam Logistics Holdings Berhad isn’t a huge company, given its market capitalisation of RM378m. That makes it extra important to check on its balance sheet strength.
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 Tiong Nam Logistics Holdings Berhad insiders have a significant amount of capital invested in the stock. Indeed, they hold RM122m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 32% of the company; visible skin in the game.