Should You Be Adding Fujikura (TSE:5803) To Your Watchlist Today?

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. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 Fujikura (TSE:5803). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Fujikura with the means to add long-term value to shareholders.

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Fujikura's Improving Profits

Fujikura has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Fujikura's EPS grew from JP¥109 to JP¥269, over the previous 12 months. Year on year growth of 146% is certainly a sight to behold.

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 Fujikura is growing revenues, and EBIT margins improved by 4.3 percentage points to 13%, 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.

See our latest analysis for Fujikura

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Fujikura.

Are Fujikura Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. The median total compensation for CEOs of companies similar in size to Fujikura, with market caps between JP¥561b and JP¥1.7t, is around JP¥161m.

Fujikura's CEO took home a total compensation package worth JP¥101m in the year leading up to March 2024. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Fujikura To Your Watchlist?

Fujikura's earnings have taken off in quite an impressive fashion. Such fast EPS growth prompts the question: has the business reached an inflection point? At the same time the reasonable CEO compensation reflects well on the board of directors. So faced with these facts, it seems that researching this stock a little more may lead you to discover an investment opportunity that meets your quality standards. You still need to take note of risks, for example - Fujikura has 2 warning signs (and 1 which shouldn't be ignored) 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.