Here's Why Vertex (TSE:5290) Has Caught The Eye Of Investors

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 Vertex (TSE:5290). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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Vertex's 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. 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 Vertex grew its EPS by 11% per year. That growth rate is fairly good, assuming the company can keep it up.

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. EBIT margins for Vertex remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 5.1% to JP¥39b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

View our latest analysis for Vertex

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Vertex Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Vertex insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at JP¥5.9b. This considerable investment should help drive long-term value in the business. That amounts to 7.1% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add Vertex To Your Watchlist?

One important encouraging feature of Vertex is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. It is worth noting though that we have found 1 warning sign for Vertex that you need to take into consideration.

Although Vertex 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.