Does Optowide Technologies (SHSE:688195) Deserve A Spot On Your Watchlist?

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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Optowide Technologies (SHSE:688195). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Optowide Technologies with the means to add long-term value to shareholders.

Check out our latest analysis for Optowide Technologies

How Quickly Is Optowide Technologies Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Optowide Technologies grew its EPS by 7.7% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Optowide Technologies is growing revenues, and EBIT margins improved by 7.1 percentage points to 17%, over the last year. Both of which are great metrics to check off for potential growth.

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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Optowide Technologies.

Are Optowide Technologies Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Optowide Technologies insiders own a meaningful share of the business. Owning 37% of the company, insiders have plenty riding on the performance of the the share price. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. At the current share price, that insider holding is worth a staggering CN¥2.1b. That level of investment from insiders is nothing to sneeze at.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Optowide Technologies, with market caps between CN¥2.9b and CN¥12b, is around CN¥967k.

Optowide Technologies' CEO took home a total compensation package worth CN¥765k in the year leading up to December 2023. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Optowide Technologies Worth Keeping An Eye On?

One positive for Optowide Technologies is that it is growing EPS. That's nice to see. The fact that EPS is growing is a genuine positive for Optowide Technologies, but the pleasant picture gets better than that. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. One of Buffett's considerations when discussing businesses is if they are capital light or capital intensive. Generally, a company with a high return on equity is capital light, and can thus fund growth more easily. So you might want to check this graph comparing Optowide Technologies' ROE with industry peers (and the market at large).

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 CN 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.