We Ran A Stock Scan For Earnings Growth And Mitsubishi Heavy Industries (TSE:7011) Passed With Ease

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Mitsubishi Heavy Industries (TSE:7011), which has not only revenues, but also profits. 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.

View our latest analysis for Mitsubishi Heavy Industries

How Quickly Is Mitsubishi Heavy Industries Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Mitsubishi Heavy Industries has managed to grow EPS by 28% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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 Mitsubishi Heavy Industries remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 11% to JP¥4.8t. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

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

Are Mitsubishi Heavy Industries Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a JP¥6.3t company like Mitsubishi Heavy Industries. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth JP¥24b. We note that this amounts to 0.4% of the company, which may be small owing to the sheer size of Mitsubishi Heavy Industries but it's still worth mentioning. This should still be a great incentive for management to maximise shareholder value.

Is Mitsubishi Heavy Industries Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Mitsubishi Heavy Industries' strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. You still need to take note of risks, for example - Mitsubishi Heavy Industries has 1 warning sign we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.