Here's Why We Think Amita HoldingsLtd (TYO:2195) Is Well Worth Watching

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Amita HoldingsLtd (TYO:2195). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Amita HoldingsLtd

How Fast Is Amita HoldingsLtd Growing Its Earnings Per Share?

In the last three years Amita HoldingsLtd's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, Amita HoldingsLtd's EPS shot from JP¥127 to JP¥297, over the last year. Year on year growth of 134% 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. Amita HoldingsLtd's EBIT margins are flat but, of some concern, its revenue is actually down. Suffice it to say that is not a great sign of growth.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

Since Amita HoldingsLtd is no giant, with a market capitalization of JP¥3.4b, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Amita HoldingsLtd Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary 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. Valued at only JP¥3.4b Amita HoldingsLtd is really small for a listed company. So despite a large proportional holding, insiders only have JP¥1.3b worth of stock. 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 have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. 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.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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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