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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
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 Petra Energy Berhad (KLSE:PENERGY). 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.
Check out our latest analysis for Petra Energy Berhad
In the last three years Petra Energy Berhad’s earnings per share took off; so much so that it’s a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Petra Energy Berhad’s EPS shot from RM0.11 to RM0.26, over the last year. It’s a rarity to see 141% year-on-year growth like that.
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. The music to the ears of Petra Energy Berhad shareholders is that EBIT margins have grown from 8.5% to 20% in the last 12 months and revenues are on an upwards trend as well. 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.
KLSE:PENERGY Earnings and Revenue History January 9th 2025
Since Petra Energy Berhad is no giant, with a market capitalisation of RM433m, you should definitely check its cash and debt before getting too excited about its prospects.
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 Petra Energy Berhad insiders have a significant amount of capital invested in the stock. To be specific, they have RM78m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 18% of the company, demonstrating a degree of high-level alignment with shareholders.
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