Is Now The Time To Put MIT Holdings (TSE:4016) On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like MIT Holdings (TSE:4016), 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 MIT Holdings with the means to add long-term value to shareholders.

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How Quickly Is MIT Holdings Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. MIT Holdings' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 44%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. EBIT margins for MIT Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 5.6% to JP¥5.3b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

See our latest analysis for MIT Holdings

MIT Holdings isn't a huge company, given its market capitalisation of JP¥1.9b. That makes it extra important to check on its balance sheet strength.

Are MIT Holdings 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 as you can imagine, the fact that MIT Holdings insiders own a significant number of shares certainly is appealing. In fact, they own 47% of the shares, making insiders a very influential shareholder group. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Valued at only JP¥1.9b MIT Holdings is really small for a listed company. So this large proportion of shares owned by insiders only amounts to JP¥896m. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Is MIT Holdings Worth Keeping An Eye On?

MIT Holdings' earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching MIT Holdings very closely. Still, you should learn about the 1 warning sign we've spotted with MIT Holdings.

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.