Here's Why Paycloud Holdings (TSE:4015) Has Caught The Eye Of Investors

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Paycloud Holdings (TSE:4015), 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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Paycloud Holdings' Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Paycloud Holdings' EPS has risen over the last 12 months, growing from JP¥14.04 to JP¥17.01. There's little doubt shareholders would be happy with that 21% gain.

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. EBIT margins for Paycloud Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 62% to JP¥9.7b. 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.

See our latest analysis for Paycloud Holdings

Since Paycloud Holdings is no giant, with a market capitalisation of JP¥11b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Paycloud Holdings Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Paycloud Holdings insiders have a significant amount of capital invested in the stock. Indeed, they hold JP¥3.7b worth of its stock. This considerable investment should help drive long-term value in the business. Those holdings account for over 34% of the company; visible skin in the game.

Does Paycloud Holdings Deserve A Spot On Your Watchlist?

As previously touched on, Paycloud Holdings is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. What about risks? Every company has them, and we've spotted 2 warning signs for Paycloud Holdings 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.