Is now the time to add Titijaya Land Berhad (KLSE:TITIJYA) to your watchlist?

It is common for many investors, especially inexperienced investors, to buy stocks in companies with a good history, even if those companies are making losses. Sometimes these stories can cloud investors’ minds and lead them to invest based on their emotions rather than good company fundamentals. Loss-making companies are constantly racing against time to become financially viable, so investors in these companies may be taking more risk than they should.

In contrast, many investors prefer to focus on companies like Titijaya Land Berhad (KLSE:TITIJYA), which not only generates revenue but also profits. While this isn’t an indication that the company is undervalued, the company’s profitability is enough to warrant some appreciation – especially if it’s growing.

Check out our latest analysis for Titijaya Land Berhad

Titijaya Land Berhad’s rising profits

Strong earnings per share (EPS) is an indicator that a company is generating solid profits that are well received by investors, and therefore the stock price tends to reflect excellent EPS performance. Therefore, for many aspiring investors, rising earnings per share is considered a good sign. It’s impressive that Titijaya Land Berhad’s earnings per share increased from RM0.0033 to RM0.019 in just one year. While this growth rate may not be repeated, it looks like a game-changing improvement.

Sales growth is a good indicator that growth is sustainable, and when combined with a high earnings before interest and taxes (EBIT) margin, it is a great way for a company to maintain a competitive advantage in the market. We note that while the EBIT margin improved from 3.7% to 19%, the company actually reported a 30% decline in revenue. While these numbers are not catastrophic, they could be better.

You can take a look at the company’s revenue and profit growth trend in the chart below. Click on the table to see the exact numbers.

Titijaya Land Berhad is not a large company given its market capitalization of RM360 million. It is therefore particularly important to check the strength of the balance sheet.

Are Titijaya Land Berhad insiders aligned with all shareholders?

It is a necessity for company directors to act in the best interests of shareholders and so insider investments always provide reassurance to the market. Titijaya Land Berhad supporters will take comfort in knowing that insiders have a significant amount of capital at their disposal aligns interests with the broader shareholder group. To be more precise, they have shares worth RM60 million. This shows clear agreement and can be a sign that you are confident in the business strategy. That’s 17% of the company, showing a high level of alignment with shareholders.

While it is always good to see that insiders have a strong belief in the company through significant investments, it is also important for shareholders to ask whether management’s remuneration policies are appropriate. Our quick analysis of CEO compensation seems to suggest this is the case. The average total compensation for CEOs of companies similar in size to Titijaya Land Berhad and with a market capitalization below RM862 million is around RM493,000.

The CEO of Titijaya Land Berhad received total compensation of just RM42,000 in the year to June 2023. One could view this pay as more symbolic, suggesting that the CEO doesn’t need much compensation to stay motivated. While CEO compensation isn’t the most important aspect of a company to consider, when it’s appropriate it gives a little more confidence that leadership is looking out for shareholders’ interests. In a broader sense, it can also be a sign of a culture of integrity.

Does Titijaya Land Berhad deserve a place on your watchlist?

Titijaya Land Berhad’s earnings per share have skyrocketed and the growth rates are extremely high. The icing on the cake is that insiders own a lot of shares and the CEO’s compensation actually seems quite reasonable. The strong increase in earnings could be a signal of good business momentum. Titijaya Land Berhad certainly ticks some boxes, so we think it’s probably worth further consideration. However, you should always think about risks. Case in point: We discovered it 2 warning signs for Titijaya Land Berhad You should be aware of this, and one of them makes us a little uncomfortable.

While Titijaya Land Berhad certainly looks good, it could appeal to more investors if insiders were to buy shares. If you would like to see companies with more ownership, then check out this handpicked selection of Malaysian companies that not only demonstrate strong growth, but also have strong insider support.

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

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no positions in any stocks mentioned.