If EPS Growth Is Important To You, MS&AD Insurance Group Holdings (TSE:8725) Presents An Opportunity

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like MS&AD Insurance Group Holdings (TSE:8725). 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 Quickly Is MS&AD Insurance Group Holdings Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, MS&AD Insurance Group Holdings has achieved impressive annual EPS growth of 58%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. It's noted that MS&AD Insurance Group Holdings' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The good news is that MS&AD Insurance Group Holdings is growing revenues, and EBIT margins improved by 3.2 percentage points to 13%, over the last year. Both of which are great metrics to check off for potential growth.

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 MS&AD Insurance Group Holdings

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

Are MS&AD Insurance Group Holdings Insiders Aligned With All Shareholders?

Since MS&AD Insurance Group Holdings has a market capitalisation of JP¥4.4t, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. As a matter of fact, their holding is valued at JP¥2.2b. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.05% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does MS&AD Insurance Group Holdings Deserve A Spot On Your Watchlist?

MS&AD Insurance Group Holdings' earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching MS&AD Insurance Group Holdings very closely. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with MS&AD Insurance Group Holdings , and understanding it should be part of your investment process.

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.