We Ran A Stock Scan For Earnings Growth And Sanrio Company (TSE:8136) Passed With Ease

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Sanrio Company (TSE:8136). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Sanrio Company

Sanrio Company's Improving Profits

Over the last three years, Sanrio Company has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Sanrio Company's EPS grew from JP¥64.71 to JP¥111, over the previous 12 months. It's not often a company can achieve year-on-year growth of 71%. That could be a sign that the business has reached a true inflection point.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The good news is that Sanrio Company is growing revenues, and EBIT margins improved by 6.6 percentage points to 31%, over the last year. Both of which are great metrics to check off for potential growth.

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

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?

We would not expect to see insiders owning a large percentage of a JP¥1.1t company like Sanrio Company. But we do take comfort from the fact that they are investors in the company. We note that their impressive stake in the company is worth JP¥61b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Should You Add Sanrio Company To Your Watchlist?

Sanrio Company's earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. 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 based on this quick analysis, we do think it's worth considering Sanrio Company for a spot on your watchlist. You still need to take note of risks, for example - Sanrio Company has 1 warning sign we think you should be aware 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 significant insider holdings.

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.