Here's Why Hatch WorkLtd (TSE:148A) Has Caught The Eye Of Investors

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 currently lacks a track record of revenue and profit. 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 Hatch WorkLtd (TSE:148A), 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.

We've discovered 3 warning signs about Hatch WorkLtd. View them for free.

Hatch WorkLtd's Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's easy to see why many investors focus in on EPS growth. Hatch WorkLtd's EPS shot up from JP¥47.02 to JP¥68.48; a result that's bound to keep shareholders happy. That's a impressive gain of 46%.

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 music to the ears of Hatch WorkLtd shareholders is that EBIT margins have grown from 1.2% to 7.9% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

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.

See our latest analysis for Hatch WorkLtd

Since Hatch WorkLtd is no giant, with a market capitalisation of JP¥4.4b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Hatch WorkLtd Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Hatch WorkLtd insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 93%, company insiders are in control and have plenty of capital behind the venture. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. To give you an idea, the value of insiders' holdings in the business are valued at JP¥4.1b at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add Hatch WorkLtd To Your Watchlist?

You can't deny that Hatch WorkLtd has grown its earnings per share at a very impressive rate. That's attractive. 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 - Hatch WorkLtd has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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.