Does Togami Electric Mfg (TSE:6643) 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. 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. 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.

In contrast to all that, many investors prefer to focus on companies like Togami Electric Mfg (TSE:6643), 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 Togami Electric Mfg with the means to add long-term value to shareholders.

Check out our latest analysis for Togami Electric Mfg

How Quickly Is Togami Electric Mfg Increasing Earnings Per Share?

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. That makes EPS growth an attractive quality for any company. Over the last three years, Togami Electric Mfg has grown EPS by 16% per year. That growth rate is fairly good, assuming the company can keep it up.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Togami Electric Mfg is growing revenues, and EBIT margins improved by 3.0 percentage points to 10%, over the last year. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Since Togami Electric Mfg is no giant, with a market capitalisation of JP¥14b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Togami Electric Mfg 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. Shareholders will be pleased by the fact that insiders own Togami Electric Mfg shares worth a considerable sum. As a matter of fact, their holding is valued at JP¥2.9b. That's a lot of money, and no small incentive to work hard. That amounts to 21% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Togami Electric Mfg Deserve A Spot On Your Watchlist?

As previously touched on, Togami Electric Mfg is a growing business, which is encouraging. To add an extra spark to the fire, significant insider ownership in the company is another highlight. The combination definitely favoured by investors so consider keeping the company on a watchlist. It is worth noting though that we have found 2 warning signs for Togami Electric Mfg that you need to take into consideration.

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.