Here's Why We Think R&D ComputerLtd (TSE:3924) Might Deserve Your Attention Today

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like R&D ComputerLtd (TSE:3924), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide R&D ComputerLtd with the means to add long-term value to shareholders.

See our latest analysis for R&D ComputerLtd

R&D ComputerLtd's Improving Profits

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So EPS growth can certainly encourage an investor to take note of a stock. R&D ComputerLtd's EPS shot up from JP¥49.46 to JP¥64.06; a result that's bound to keep shareholders happy. That's a fantastic gain of 30%.

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. EBIT margins for R&D ComputerLtd remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 17% to JP¥14b. That's progress.

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

R&D ComputerLtd isn't a huge company, given its market capitalisation of JP¥14b. That makes it extra important to check on its balance sheet strength.

Are R&D ComputerLtd 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 R&D ComputerLtd will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Actually, with 46% of the company to their names, insiders are profoundly invested in the business. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. In terms of absolute value, insiders have JP¥6.4b invested in the business, at the current share price. So there's plenty there to keep them focused!

Does R&D ComputerLtd Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into R&D ComputerLtd's strong EPS growth. 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. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Even so, be aware that R&D ComputerLtd is showing 2 warning signs in our investment analysis , you should know about...

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.