Should You Be Adding Systems Engineering ConsultantsLTD (TSE:3741) To Your Watchlist 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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Systems Engineering ConsultantsLTD (TSE:3741). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Systems Engineering ConsultantsLTD with the means to add long-term value to shareholders.

View our latest analysis for Systems Engineering ConsultantsLTD

How Quickly Is Systems Engineering ConsultantsLTD 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. It certainly is nice to see that Systems Engineering ConsultantsLTD has managed to grow EPS by 20% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Systems Engineering ConsultantsLTD maintained stable EBIT margins over the last year, all while growing revenue 13% to JP¥9.1b. That's a real positive.

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.

Systems Engineering ConsultantsLTD isn't a huge company, given its market capitalisation of JP¥23b. That makes it extra important to check on its balance sheet strength.

Are Systems Engineering ConsultantsLTD Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in Systems Engineering ConsultantsLTD will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Owning 39% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. With that sort of holding, insiders have about JP¥8.7b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add Systems Engineering ConsultantsLTD To Your Watchlist?

You can't deny that Systems Engineering ConsultantsLTD has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Systems Engineering ConsultantsLTD.

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.