We Ran A Stock Scan For Earnings Growth And MUGEN ESTATELtd (TSE:3299) Passed With Ease

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 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.

In contrast to all that, many investors prefer to focus on companies like MUGEN ESTATELtd (TSE:3299), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for MUGEN ESTATELtd

How Fast Is MUGEN ESTATELtd Growing Its Earnings Per Share?

In the last three years MUGEN ESTATELtd'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. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, MUGEN ESTATELtd's EPS grew from JP¥66.53 to JP¥155, over the previous 12 months. It's not often a company can achieve year-on-year growth of 133%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

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. While we note MUGEN ESTATELtd achieved similar EBIT margins to last year, revenue grew by a solid 65% to JP¥52b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since MUGEN ESTATELtd is no giant, with a market capitalisation of JP¥34b, you should definitely check its cash and debt before getting too excited about its prospects.

Are MUGEN ESTATELtd Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that MUGEN ESTATELtd insiders own a significant number of shares certainly is appealing. Owning 48% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. With that sort of holding, insiders have about JP¥16b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Does MUGEN ESTATELtd Deserve A Spot On Your Watchlist?

MUGEN ESTATELtd's earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching MUGEN ESTATELtd very closely. We don't want to rain on the parade too much, but we did also find 3 warning signs for MUGEN ESTATELtd (2 make us uncomfortable!) that you need to be mindful 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 recent insider purchases.

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.