Does Asahi Kogyosha (TSE:1975) Deserve A Spot On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Asahi Kogyosha (TSE:1975). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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How Quickly Is Asahi Kogyosha Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. To the delight of shareholders, Asahi Kogyosha has achieved impressive annual EPS growth of 56%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that Asahi Kogyosha is growing revenues, and EBIT margins improved by 3.5 percentage points to 9.2%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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.

View our latest analysis for Asahi Kogyosha

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Asahi Kogyosha's balance sheet strength, before getting too excited.

Are Asahi Kogyosha Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Asahi Kogyosha followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Holding JP¥9.5b worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. Amounting to 13% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.

Should You Add Asahi Kogyosha To Your Watchlist?

Asahi Kogyosha'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 based on this quick analysis, we do think it's worth considering Asahi Kogyosha for a spot on your watchlist. We should say that we've discovered 1 warning sign for Asahi Kogyosha that you should be aware of before investing here.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in JP with promising growth potential and insider confidence.

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.