Does Sumiseki HoldingsInc (TSE:1514) 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Sumiseki HoldingsInc (TSE:1514). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Sumiseki HoldingsInc with the means to add long-term value to shareholders.

Check out our latest analysis for Sumiseki HoldingsInc

How Fast Is Sumiseki HoldingsInc Growing Its Earnings Per Share?

In the last three years Sumiseki HoldingsInc's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, Sumiseki HoldingsInc's EPS shot from JP¥68.32 to JP¥146, over the last year. It's not often a company can achieve year-on-year growth of 114%.

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. Sumiseki HoldingsInc's EBIT margins have actually improved by 25.8 percentage points in the last year, to reach 35%, but, on the flip side, revenue was down 43%. That's not a good look.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Sumiseki HoldingsInc 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. So it is good to see that Sumiseki HoldingsInc insiders have a significant amount of capital invested in the stock. To be specific, they have JP¥4.3b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 7.1% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Sumiseki HoldingsInc Deserve A Spot On Your Watchlist?

Sumiseki HoldingsInc's earnings per share growth have been climbing higher at an appreciable rate. 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, Sumiseki HoldingsInc is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. You still need to take note of risks, for example - Sumiseki HoldingsInc has 2 warning signs (and 1 which is potentially serious) we think 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.

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