Here's Why We Think YONEX (TSE:7906) Is Well Worth Watching

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 YONEX (TSE:7906), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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YONEX's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, YONEX has grown EPS by 23% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. While we note YONEX achieved similar EBIT margins to last year, revenue grew by a solid 19% to JP¥138b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Check out our latest analysis for YONEX

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of YONEX's forecast profits?

Are YONEX 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 YONEX insiders have a significant amount of capital invested in the stock. Notably, they have an enviable stake in the company, worth JP¥32b. Coming in at 12% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Looking very optimistic for investors.

Does YONEX Deserve A Spot On Your Watchlist?

You can't deny that YONEX has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in YONEX's continuing strength. 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. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of YONEX. You might benefit from giving it a glance today.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Japanese companies which have demonstrated growth backed by significant insider holdings.

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.