With EPS Growth And More, QLS Holdings (TSE:7075) 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like QLS Holdings (TSE:7075). 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.

We've discovered 2 warning signs about QLS Holdings. View them for free.

QLS Holdings' Improving Profits

In the last three years QLS Holdings' 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. Thus, it makes sense to focus on more recent growth rates, instead. QLS Holdings' EPS skyrocketed from JP¥39.19 to JP¥53.18, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 36%.

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 QLS Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 27% to JP¥10b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

View our latest analysis for QLS Holdings

Since QLS Holdings is no giant, with a market capitalisation of JP¥5.3b, you should definitely check its cash and debt before getting too excited about its prospects.

Are QLS Holdings 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 we're pleased to report that QLS Holdings insiders own a meaningful share of the business. In fact, they own 72% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. 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¥3.8b at the current share price. So there's plenty there to keep them focused!

Does QLS Holdings Deserve A Spot On Your Watchlist?

For growth investors, QLS Holdings' raw rate of earnings growth is a beacon in the night. 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. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Still, you should learn about the 2 warning signs we've spotted with QLS Holdings.

Although QLS Holdings certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Japanese companies that not only boast of strong growth but have strong insider backing.

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.