Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
So if you're like me, you might be more interested in profitable, growing companies, like MK Seiko (TYO:5906). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
See our latest analysis for MK Seiko
How Fast Is MK Seiko Growing?
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). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. MK Seiko managed to grow EPS by 8.9% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.
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. While we note MK Seiko's EBIT margins were flat over the last year, revenue grew by a solid 2.5% to JP¥25b. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Since MK Seiko is no giant, with a market capitalization of JP¥7.0b, so you should definitely check its cash and debt before getting too excited about its prospects.
Are MK Seiko Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that MK Seiko insiders have a significant amount of capital invested in the stock. To be specific, they have JP¥1.6b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 23% of the company, demonstrating a degree of high-level alignment with shareholders.
Does MK Seiko Deserve A Spot On Your Watchlist?
As I already mentioned, MK Seiko is a growing business, which is what I like to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Still, you should learn about the 3 warning signs we've spotted with MK Seiko (including 1 which shouldn't be ignored) .
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
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. 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.
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About TSE:5906
MK Seiko
Develops, produces, and sells automotive service and information equipment, and household products.
Flawless balance sheet and good value.
