Do Dai-ichi Life Holdings' (TSE:8750) Earnings Warrant Your Attention?

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 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Dai-ichi Life Holdings (TSE:8750). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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How Fast Is Dai-ichi Life Holdings Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Dai-ichi Life Holdings grew its EPS by 6.9% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. Our analysis has highlighted that Dai-ichi Life Holdings' revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Unfortunately, Dai-ichi Life Holdings' revenue dropped 7.4% last year, but the silver lining is that EBIT margins improved from -0.5% to 8.5%. That's not a good look.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

View our latest analysis for Dai-ichi Life Holdings

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Dai-ichi Life Holdings.

Are Dai-ichi Life Holdings Insiders Aligned With All Shareholders?

Owing to the size of Dai-ichi Life Holdings, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. Indeed, they hold JP¥1.8b worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 0.04% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Dai-ichi Life Holdings, with market caps over JP¥1.2t, is about JP¥231m.

Dai-ichi Life Holdings offered total compensation worth JP¥119m to its CEO in the year to March 2024. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Is Dai-ichi Life Holdings Worth Keeping An Eye On?

As previously touched on, Dai-ichi Life Holdings is a growing business, which is encouraging. The growth of EPS may be the eye-catching headline for Dai-ichi Life Holdings, but there's more to bring joy for shareholders. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Dai-ichi Life Holdings is trading on a high P/E or a low P/E, relative to its industry.

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.