Is Now The Time To Put Alfresa Holdings (TSE:2784) On Your Watchlist?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Alfresa Holdings (TSE:2784). 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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How Fast Is Alfresa Holdings Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Alfresa Holdings has managed to grow EPS by 21% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Alfresa Holdings maintained stable EBIT margins over the last year, all while growing revenue 4.0% to JP¥2.9t. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

View our latest analysis for Alfresa Holdings

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

Are Alfresa 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 Alfresa Holdings insiders have a significant amount of capital invested in the stock. Indeed, they hold JP¥4.3b worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 1.3%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Is Alfresa Holdings Worth Keeping An Eye On?

You can't deny that Alfresa Holdings 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 Alfresa Holdings' continuing strength. 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. However, before you get too excited we've discovered 2 warning signs for Alfresa Holdings that you should be aware of.

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.