Do Urbanet CorporationLtd's (TYO:3242) Earnings Warrant Your Attention?

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 completely 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.'

In contrast to all that, I prefer to spend time on companies like Urbanet CorporationLtd (TYO:3242), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Urbanet CorporationLtd

How Fast Is Urbanet CorporationLtd Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Urbanet CorporationLtd grew its EPS by 8.6% per year. That's a good rate of growth, if it can be sustained.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Urbanet CorporationLtd shareholders can take confidence from the fact that EBIT margins are up from 8.8% to 13%, and revenue is growing. That's great to see, on both counts.

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

Urbanet CorporationLtd isn't a huge company, given its market capitalization of JP¥9.8b. That makes it extra important to check on its balance sheet strength.

Are Urbanet CorporationLtd Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Urbanet CorporationLtd insiders have a significant amount of capital invested in the stock. To be specific, they have JP¥2.6b worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 27% of the company, demonstrating a degree of high-level alignment with shareholders.

Is Urbanet CorporationLtd Worth Keeping An Eye On?

As I already mentioned, Urbanet CorporationLtd is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Urbanet CorporationLtd (2 are significant) you should be aware of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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. 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.
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