With EPS Growth And More, Sakata INX (TSE:4633) Makes An Interesting Case

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Sakata INX (TSE:4633). 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 Sakata INX Increasing Earnings Per Share?

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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that Sakata INX's EPS has grown 29% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Sakata INX maintained stable EBIT margins over the last year, all while growing revenue 7.6% to JP¥246b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Check out our latest analysis for Sakata INX

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

Are Sakata INX Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Sakata INX shares worth a considerable sum. To be specific, they have JP¥2.1b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 2.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Sakata INX Deserve A Spot On Your Watchlist?

For growth investors, Sakata INX's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Sakata INX's 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. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Sakata INX , and understanding it should be part of your investment process.

Although Sakata INX certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Japanese companies that not only boast of strong growth but have strong insider backing.

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.