Does MonotaRO (TSE:3064) Deserve A Spot On Your Watchlist?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in MonotaRO (TSE:3064). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide MonotaRO with the means to add long-term value to shareholders.

See our latest analysis for MonotaRO

How Fast Is MonotaRO 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) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. MonotaRO managed to grow EPS by 15% per year, over three years. That's a pretty good rate, if the company can sustain it.

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. EBIT margins for MonotaRO remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 12% to JP¥269b. That's encouraging news for the company!

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

Fortunately, we've got access to analyst forecasts of MonotaRO's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are MonotaRO Insiders Aligned With All Shareholders?

Since MonotaRO has a market capitalisation of JP¥1.1t, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. As a matter of fact, their holding is valued at JP¥6.7b. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.6%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Is MonotaRO Worth Keeping An Eye On?

One important encouraging feature of MonotaRO is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. If you think MonotaRO might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.

Although MonotaRO 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.