Is Now The Time To Put Sumitomo Realty & Development (TSE:8830) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Sumitomo Realty & Development (TSE:8830). 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.

See our latest analysis for Sumitomo Realty & Development

Sumitomo Realty & Development's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Sumitomo Realty & Development managed to grow EPS by 16% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

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. EBIT margins for Sumitomo Realty & Development remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 8.5% to JP¥1.0t. That's a real positive.

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

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Sumitomo Realty & Development's future profits.

Are Sumitomo Realty & Development Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. Our analysis has discovered that the median total compensation for the CEOs of companies like Sumitomo Realty & Development, with market caps over JP¥1.2t, is about JP¥215m.

Sumitomo Realty & Development offered total compensation worth JP¥168m to its CEO in the year to March 2024. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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 good governance, more generally.

Should You Add Sumitomo Realty & Development To Your Watchlist?

One positive for Sumitomo Realty & Development is that it is growing EPS. That's nice to see. To add to this, the modest CEO compensation should tell investors that the directors have an active interest in delivering the best for shareholders. All things considered, Sumitomo Realty & Development is definitely worth taking a deeper dive into. What about risks? Every company has them, and we've spotted 2 warning signs for Sumitomo Realty & Development (of which 1 shouldn't be ignored!) you should know about.

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.

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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.