If EPS Growth Is Important To You, Tosei (TSE:8923) Presents An Opportunity

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

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 Tosei (TSE:8923). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Tosei with the means to add long-term value to shareholders.

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Tosei's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Tosei has managed to grow EPS by 29% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. While we note Tosei achieved similar EBIT margins to last year, revenue grew by a solid 18% to JP¥97b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

See our latest analysis for Tosei

Fortunately, we've got access to analyst forecasts of Tosei's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Tosei Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Tosei followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they have a considerable amount of wealth invested in it, currently valued at JP¥41b. That equates to 26% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Is Tosei Worth Keeping An Eye On?

For growth investors, Tosei's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Tosei's continuing strength. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. However, before you get too excited we've discovered 2 warning signs for Tosei (1 is potentially serious!) that you should be aware 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.

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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.