Should You Be Adding Sanrio Company (TSE:8136) 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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Sanrio Company (TSE:8136). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Sanrio Company with the means to add long-term value to shareholders.

How Fast Is Sanrio Company Growing Its Earnings Per Share?

In the last three years Sanrio Company'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, Sanrio Company's EPS grew from JP¥72.35 to JP¥149, over the previous 12 months. It's not often a company can achieve year-on-year growth of 106%. The best case scenario? That the business has hit a true inflection point.

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. The good news is that Sanrio Company is growing revenues, and EBIT margins improved by 9.5 percentage points to 35%, over the last year. That's great to see, on both counts.

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.

View our latest analysis for Sanrio Company

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

Are Sanrio Company Insiders Aligned With All Shareholders?

Owing to the size of Sanrio Company, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at JP¥90b. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Is Sanrio Company Worth Keeping An Eye On?

Sanrio Company's earnings per share growth have been climbing higher at an appreciable rate. 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. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Sanrio Company is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Even so, be aware that Sanrio Company is showing 1 warning sign in our investment analysis , you should know about...

Although Sanrio Company certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Japanese companies that not only boast of strong growth but have strong insider backing.

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.