With EPS Growth And More, OBICLtd (TSE:4684) Makes An Interesting Case

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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like OBICLtd (TSE:4684). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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How Fast Is OBICLtd Growing?

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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years OBICLtd grew its EPS by 15% per year. That's a good rate of growth, if it can be sustained.

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. EBIT margins for OBICLtd remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 7.8% to JP¥118b. 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. For finer detail, click on the image.

View our latest analysis for OBICLtd

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for OBICLtd .

Are OBICLtd Insiders Aligned With All Shareholders?

Since OBICLtd has a market capitalisation of JP¥1.9t, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth JP¥519b. Coming in at 27% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Looking very optimistic for investors.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations over JP¥1.2t, like OBICLtd, the median CEO pay is around JP¥209m.

OBICLtd's CEO took home a total compensation package worth JP¥127m in the year leading up to March 2024. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does OBICLtd Deserve A Spot On Your Watchlist?

As previously touched on, OBICLtd is a growing business, which is encouraging. The fact that EPS is growing is a genuine positive for OBICLtd, but the pleasant picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. If you think OBICLtd might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company .

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Japanese companies which have demonstrated growth backed by significant insider holdings.

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.