Here's Why We Think Japan Electronic Materials (TSE:6855) Might Deserve Your Attention Today

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. 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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Japan Electronic Materials (TSE:6855). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Japan Electronic Materials with the means to add long-term value to shareholders.

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How Quickly Is Japan Electronic Materials Increasing Earnings Per Share?

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. Japan Electronic Materials managed to grow EPS by 11% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

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 Japan Electronic Materials is growing revenues, and EBIT margins improved by 4.7 percentage points to 20%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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.

See our latest analysis for Japan Electronic Materials

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Japan Electronic Materials' balance sheet strength, before getting too excited.

Are Japan Electronic Materials Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own Japan Electronic Materials shares worth a considerable sum. To be specific, they have JP¥4.6b worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 9.8% of the company; visible skin in the game.

Is Japan Electronic Materials Worth Keeping An Eye On?

One important encouraging feature of Japan Electronic Materials is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Japan Electronic Materials , and understanding this should be part of your investment process.

Although Japan Electronic Materials 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.