Should You Be Adding Japan System Techniques (TSE:4323) To Your Watchlist Today?

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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Japan System Techniques (TSE:4323). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Japan System Techniques with the means to add long-term value to shareholders.

See our latest analysis for Japan System Techniques

How Quickly Is Japan System Techniques Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Japan System Techniques has grown EPS by 27% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Japan System Techniques maintained stable EBIT margins over the last year, all while growing revenue 12% to JP¥27b. That's encouraging news for the company!

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.

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 System Techniques' balance sheet strength, before getting too excited.

Are Japan System Techniques 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 System Techniques shares worth a considerable sum. As a matter of fact, their holding is valued at JP¥2.4b. That's a lot of money, and no small incentive to work hard. That amounts to 5.2% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add Japan System Techniques To Your Watchlist?

For growth investors, Japan System Techniques' raw rate of earnings growth is a beacon in the night. 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. Now, you could try to make up your mind on Japan System Techniques by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although Japan System Techniques 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.