With EPS Growth And More, Round One (TSE:4680) Makes An Interesting Case

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. 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. 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 Round One (TSE:4680), 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.

View our latest analysis for Round One

How Fast Is Round One Growing Its Earnings Per Share?

In the last three years Round One's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. To the delight of shareholders, Round One's EPS soared from JP¥44.14 to JP¥61.32, over the last year. That's a commendable gain of 39%.

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. The music to the ears of Round One shareholders is that EBIT margins have grown from 14% to 16% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Round One's future EPS 100% free.

Are Round One 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 those who are interested in Round One will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. In fact, they own 35% of the shares, making insiders a very influential shareholder group. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. That means they have plenty of their own capital riding on the performance of the business!

Is Round One Worth Keeping An Eye On?

You can't deny that Round One has grown its earnings per share at a very impressive rate. That's attractive. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. You still need to take note of risks, for example - Round One has 1 warning sign we think you should be aware of.

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.