Here's Why We Think DM SolutionsLtd (TSE:6549) Might Deserve Your Attention Today

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 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like DM SolutionsLtd (TSE:6549). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide DM SolutionsLtd with the means to add long-term value to shareholders.

See our latest analysis for DM SolutionsLtd

DM SolutionsLtd's Improving Profits

In the last three years DM SolutionsLtd's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Over the last year, DM SolutionsLtd increased its EPS from JP¥135 to JP¥148. That's a modest gain of 9.1%.

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. DM SolutionsLtd maintained stable EBIT margins over the last year, all while growing revenue 6.7% to JP¥19b. That's encouraging news for the company!

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.

DM SolutionsLtd isn't a huge company, given its market capitalisation of JP¥3.9b. That makes it extra important to check on its balance sheet strength.

Are DM SolutionsLtd Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that DM SolutionsLtd insiders own a meaningful share of the business. To be exact, company insiders hold 71% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. To give you an idea, the value of insiders' holdings in the business are valued at JP¥2.7b at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add DM SolutionsLtd To Your Watchlist?

One important encouraging feature of DM SolutionsLtd is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination definitely favoured by investors so consider keeping the company on a watchlist. Still, you should learn about the 2 warning signs we've spotted with DM SolutionsLtd.

Although DM SolutionsLtd 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.