Do Sharingtechnology's (TSE:3989) Earnings Warrant Your Attention?

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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Sharingtechnology (TSE:3989). 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.

View our latest analysis for Sharingtechnology

How Fast Is Sharingtechnology Growing Its Earnings Per Share?

Over the last three years, Sharingtechnology has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Sharingtechnology has grown its trailing twelve month EPS from JP¥60.40 to JP¥63.11, in the last year. That amounts to a small improvement of 4.5%.

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. Sharingtechnology shareholders can take confidence from the fact that EBIT margins are up from 20% to 24%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Since Sharingtechnology is no giant, with a market capitalisation of JP¥21b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Sharingtechnology 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. So it is good to see that Sharingtechnology insiders have a significant amount of capital invested in the stock. Indeed, they hold JP¥2.6b worth of its stock. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 12% of the shares on issue for the business, an appreciable amount considering the market cap.

Should You Add Sharingtechnology To Your Watchlist?

One important encouraging feature of Sharingtechnology is that it is growing profits. To add an extra spark to the fire, significant insider ownership in the company is another highlight. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Even so, be aware that Sharingtechnology is showing 1 warning sign in our investment analysis , you should know about...

Although Sharingtechnology 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.