Here's Why We Think Stmn (TSE:4019) Is Well Worth Watching

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Stmn (TSE:4019). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Stmn with the means to add long-term value to shareholders.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Stmn'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 it's no surprise that some investors are more inclined to invest in profitable businesses. In impressive fashion, Stmn's EPS grew from JP¥9.96 to JP¥18.37, over the previous 12 months. It's not often a company can achieve year-on-year growth of 84%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

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. While we note Stmn achieved similar EBIT margins to last year, revenue grew by a solid 43% to JP¥2.9b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

View our latest analysis for Stmn

Since Stmn is no giant, with a market capitalisation of JP¥11b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Stmn Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Stmn insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 55%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. In terms of absolute value, insiders have JP¥5.9b invested in the business, at the current share price. So there's plenty there to keep them focused!

Is Stmn Worth Keeping An Eye On?

Stmn's earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, Stmn is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. It is worth noting though that we have found 1 warning sign for Stmn that you need to take into consideration.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.