Here's Why TOKYO KEIKI (TSE:7721) Has Caught The Eye Of Investors

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 TOKYO KEIKI (TSE:7721), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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TOKYO KEIKI'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. TOKYO KEIKI's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 37%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. The music to the ears of TOKYO KEIKI shareholders is that EBIT margins have grown from 6.0% to 8.4% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Check out our latest analysis for TOKYO KEIKI

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for TOKYO KEIKI's future EPS 100% free.

Are TOKYO KEIKI 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 TOKYO KEIKI shares worth a considerable sum. As a matter of fact, their holding is valued at JP¥5.3b. This considerable investment should help drive long-term value in the business. Despite being just 4.9% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add TOKYO KEIKI To Your Watchlist?

TOKYO KEIKI's earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering TOKYO KEIKI for a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with TOKYO KEIKI , and understanding this should be part of your investment process.

Although TOKYO KEIKI 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.