With EPS Growth And More, MonotaRO (TSE:3064) Makes An Interesting Case

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like MonotaRO (TSE:3064), which has not only revenues, but also profits. 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.

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MonotaRO's Earnings Per Share Are Growing

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, MonotaRO has grown EPS by 15% per year. That's a pretty good rate, if the company can sustain it.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. MonotaRO maintained stable EBIT margins over the last year, all while growing revenue 14% to JP¥298b. That's encouraging news for the company!

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.

Check out our latest analysis for MonotaRO

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?

Owing to the size of MonotaRO, 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. As a matter of fact, their holding is valued at JP¥4.2b. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 0.3%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations between JP¥587b and JP¥1.8t, like MonotaRO, the median CEO pay is around JP¥164m.

MonotaRO offered total compensation worth JP¥145m to its CEO in the year to December 2024. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Is MonotaRO Worth Keeping An Eye On?

One important encouraging feature of MonotaRO is that it is growing profits. The fact that EPS is growing is a genuine positive for MonotaRO, but the pleasant picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of MonotaRO. You might benefit from giving it a glance today.

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.