Here's Why We Think Fibon Berhad (KLSE:FIBON) Is Well Worth Watching

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and 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 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 Fibon Berhad (KLSE:FIBON), 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.

See our latest analysis for Fibon Berhad

How Quickly Is Fibon Berhad Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Fibon Berhad has managed to grow EPS by 18% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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 good news is that Fibon Berhad is growing revenues, and EBIT margins improved by 11.6 percentage points to 23%, over the last year. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Since Fibon Berhad is no giant, with a market capitalisation of RM37m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Fibon Berhad Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Fibon Berhad insiders own a meaningful share of the business. To be exact, company insiders hold 81% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. Valued at only RM37m Fibon Berhad is really small for a listed company. So despite a large proportional holding, insiders only have RM30m worth of stock. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations under RM896m, like Fibon Berhad, the median CEO pay is around RM494k.

The CEO of Fibon Berhad was paid just RM34k in total compensation for the year ending May 2022. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Does Fibon Berhad Deserve A Spot On Your Watchlist?

For growth investors, Fibon Berhad's raw rate of earnings growth is a beacon in the night. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. This may only be a fast rundown, but the key takeaway is that Fibon Berhad is worth keeping an eye on. What about risks? Every company has them, and we've spotted 4 warning signs for Fibon Berhad (of which 2 make us uncomfortable!) you should know about.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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