With EPS Growth And More, ikuyoLtd (TSE:7273) Makes An Interesting Case

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 ikuyoLtd (TSE:7273), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide ikuyoLtd with the means to add long-term value to shareholders.

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ikuyoLtd's Improving Profits

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. Which is why EPS growth is looked upon so favourably. Commendations have to be given in seeing that ikuyoLtd grew its EPS from JP¥23.18 to JP¥112, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. This could point to the business hitting a point of inflection.

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. EBIT margins for ikuyoLtd remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 17% to JP¥21b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Check out our latest analysis for ikuyoLtd

ikuyoLtd isn't a huge company, given its market capitalisation of JP¥20b. That makes it extra important to check on its balance sheet strength.

Are ikuyoLtd Insiders Aligned With All Shareholders?

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. Shareholders will be pleased by the fact that insiders own ikuyoLtd shares worth a considerable sum. Indeed, they hold JP¥2.4b worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 12% of the company; visible skin in the game.

Should You Add ikuyoLtd To Your Watchlist?

ikuyoLtd's earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, ikuyoLtd is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. What about risks? Every company has them, and we've spotted 3 warning signs for ikuyoLtd (of which 2 are significant!) you should know about.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Japanese companies which have demonstrated growth backed by significant insider holdings.

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.