Do Tokio Marine Holdings' (TSE:8766) Earnings Warrant Your Attention?

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. 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.

In contrast to all that, many investors prefer to focus on companies like Tokio Marine Holdings (TSE:8766), which has not only revenues, but also profits. 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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Tokio Marine Holdings' Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Recognition must be given to the that Tokio Marine Holdings has grown EPS by 39% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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 Tokio Marine 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 Tokio Marine Holdings is growing revenues, and EBIT margins improved by 4.2 percentage points to 19%, over the last year. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

View our latest analysis for Tokio Marine Holdings

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Tokio Marine Holdings' future profits.

Are Tokio Marine Holdings Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a JP¥11t company like Tokio Marine Holdings. But we do take comfort from the fact that they are investors in the company. As a matter of fact, their holding is valued at JP¥3.3b. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.03%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Does Tokio Marine Holdings Deserve A Spot On Your Watchlist?

Tokio Marine Holdings' earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. 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. So at the surface level, Tokio Marine Holdings is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Still, you should learn about the 2 warning signs we've spotted with Tokio Marine Holdings (including 1 which is concerning).

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.