Here's Why I Think AFC-HD AMS Life Science (TYO:2927) Is An Interesting Stock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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.

So if you're like me, you might be more interested in profitable, growing companies, like AFC-HD AMS Life Science (TYO:2927). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for AFC-HD AMS Life Science

How Quickly Is AFC-HD AMS Life Science Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. AFC-HD AMS Life Science managed to grow EPS by 13% per year, over three years. That's a good rate of growth, if it can be sustained.

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 good news is that AFC-HD AMS Life Science is growing revenues, and EBIT margins improved by 2.6 percentage points to 8.4%, over the last year. 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. To see the actual numbers, click on the chart.

AFC-HD AMS Life Science isn't a huge company, given its market capitalization of JP¥13b. That makes it extra important to check on its balance sheet strength.

Are AFC-HD AMS Life Science Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that AFC-HD AMS Life Science insiders have a significant amount of capital invested in the stock. Indeed, they hold JP¥3.7b worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 30% of the company, demonstrating a degree of high-level alignment with shareholders.

Is AFC-HD AMS Life Science Worth Keeping An Eye On?

One important encouraging feature of AFC-HD AMS Life Science is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of AFC-HD AMS Life Science.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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. 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.
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