Here's Why I Think Amita HoldingsLtd (TYO:2195) Is An Interesting Stock

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like Amita HoldingsLtd (TYO:2195). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Amita HoldingsLtd

How Fast Is Amita HoldingsLtd Growing Its Earnings Per Share?

Over the last three years, Amita HoldingsLtd has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, Amita HoldingsLtd's EPS shot from JP¥139 to JP¥332, over the last year. You don't see 139% year-on-year growth like that, very often.

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. Amita HoldingsLtd's EBIT margins are flat but, of some concern, its revenue is actually down. And that does make me a little more cautious of the stock.

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.

Since Amita HoldingsLtd is no giant, with a market capitalization of JP¥3.3b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Amita HoldingsLtd Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Amita HoldingsLtd insiders own a significant number of shares certainly appeals to me. Actually, with 38% of the company to their names, insiders are profoundly invested in the business. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. Of course, Amita HoldingsLtd is a very small company, with a market cap of only JP¥3.3b. That means insiders only have JP¥1.3b worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does Amita HoldingsLtd Deserve A Spot On Your Watchlist?

Amita HoldingsLtd's earnings per share have taken off like a rocket aimed right at the moon. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Amita HoldingsLtd for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Amita HoldingsLtd you should be aware of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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. 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.
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