Stock Analysis

Here's Why We Think Kyowa Kirin (TSE:4151) Is Well Worth Watching

TSE:4151
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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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Kyowa Kirin (TSE:4151), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Kyowa Kirin with the means to add long-term value to shareholders.

Check out our latest analysis for Kyowa Kirin

How Quickly Is Kyowa Kirin 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. It certainly is nice to see that Kyowa Kirin has managed to grow EPS by 20% per year 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. Kyowa Kirin maintained stable EBIT margins over the last year, all while growing revenue 11% to JP¥442b. That's progress.

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

earnings-and-revenue-history
TSE:4151 Earnings and Revenue History March 19th 2024

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Kyowa Kirin.

Are Kyowa Kirin Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. Our analysis has discovered that the median total compensation for the CEOs of companies like Kyowa Kirin, with market caps over JP¥1.2t, is about JP¥227m.

The Kyowa Kirin CEO received JP¥182m in compensation for the year ending December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Kyowa Kirin Deserve A Spot On Your Watchlist?

You can't deny that Kyowa Kirin has grown its earnings per share at a very impressive rate. That's attractive. Strong EPS growth is a great look for the company and reasonable CEO compensation sweetens the deal for investors ass it alludes to management being conscious of frivolous spending. We think that based on its merits alone, this stock is worth watching into the future. We don't want to rain on the parade too much, but we did also find 1 warning sign for Kyowa Kirin that you need to be mindful of.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Kyowa Kirin is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.

About TSE:4151

Kyowa Kirin

Engages in the research, development, manufacturing, marketing, and import/export of pharmaceuticals for oncology, nephrology, central nervous system, and immunology therapeutic areas in Japan, the United States, rest of the Americas, Europe, Asia, and internationally.

Flawless balance sheet with solid track record and pays a dividend.