Here's Why We Think Mitsubishi UFJ Financial Group (TSE:8306) Is Well Worth Watching

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

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 Mitsubishi UFJ Financial Group (TSE:8306). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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How Quickly Is Mitsubishi UFJ Financial Group 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. Mitsubishi UFJ Financial Group managed to grow EPS by 7.9% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. It's noted that Mitsubishi UFJ Financial Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Mitsubishi UFJ Financial Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 69% to JP¥6.2t. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Check out our latest analysis for Mitsubishi UFJ Financial Group

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Mitsubishi UFJ Financial Group's future EPS 100% free.

Are Mitsubishi UFJ Financial Group Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a JP¥22t company like Mitsubishi UFJ Financial Group. But we are reassured by the fact they have invested in the company. Indeed, they hold JP¥1.8b worth of its stock. This considerable investment should help drive long-term value in the business. Even though that's only about 0.008% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Mitsubishi UFJ Financial Group Deserve A Spot On Your Watchlist?

As previously touched on, Mitsubishi UFJ Financial Group is a growing business, which is encouraging. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. These two factors are a huge highlight for the company which should be a strong contender your watchlists. You still need to take note of risks, for example - Mitsubishi UFJ Financial Group has 1 warning sign we think you should be aware of.

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.