We Ran A Stock Scan For Earnings Growth And Sumitomo Mitsui Financial Group (TSE:8316) Passed With Ease

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Sumitomo Mitsui Financial Group (TSE:8316). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Sumitomo Mitsui Financial Group

How Quickly Is Sumitomo Mitsui Financial Group Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Sumitomo Mitsui Financial Group has grown EPS by 13% per year. That growth rate is fairly good, assuming the company can keep it up.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It's noted that Sumitomo Mitsui 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. While we note Sumitomo Mitsui Financial Group achieved similar EBIT margins to last year, revenue grew by a solid 16% to JP¥4.6t. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

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 Sumitomo Mitsui Financial Group.

Are Sumitomo Mitsui Financial Group Insiders Aligned With All Shareholders?

Owing to the size of Sumitomo Mitsui Financial Group, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. To be specific, they have JP¥6.4b worth of shares. This considerable investment should help drive long-term value in the business. Despite being just 0.05% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Sumitomo Mitsui Financial Group Deserve A Spot On Your Watchlist?

One positive for Sumitomo Mitsui Financial Group is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Sumitomo Mitsui Financial Group is trading on a high P/E or a low P/E, relative to its industry.

Although Sumitomo Mitsui Financial Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Japanese companies that not only boast of strong growth but have strong insider backing.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com