Should You Be Adding Tokyu Fudosan Holdings (TSE:3289) To Your Watchlist Today?

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Tokyu Fudosan Holdings (TSE:3289), 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 Tokyu Fudosan Holdings with the means to add long-term value to shareholders.

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Tokyu Fudosan Holdings' Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Tokyu Fudosan Holdings' EPS has grown 26% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Tokyu Fudosan Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.2% to JP¥1.1t. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

See our latest analysis for Tokyu Fudosan Holdings

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

Are Tokyu Fudosan Holdings 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. The median total compensation for CEOs of companies similar in size to Tokyu Fudosan Holdings, with market caps between JP¥571b and JP¥1.7t, is around JP¥159m.

Tokyu Fudosan Holdings offered total compensation worth JP¥112m to its CEO in the year to March 2024. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Does Tokyu Fudosan Holdings Deserve A Spot On Your Watchlist?

For growth investors, Tokyu Fudosan Holdings' raw rate of earnings growth is a beacon in the night. With swiftly growing earnings, the best days may still be to come, and the modest CEO pay suggests the company is careful with cash. We think that based on its merits alone, this stock is worth watching into the future. However, before you get too excited we've discovered 2 warning signs for Tokyu Fudosan Holdings (1 is a bit concerning!) that you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Japanese companies which have demonstrated growth backed by significant insider holdings.

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.