Here's Why We Think Furuno Electric (TSE:6814) 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Furuno Electric (TSE:6814). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Furuno Electric with the means to add long-term value to shareholders.

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How Fast Is Furuno Electric Growing Its Earnings Per Share?

Over the last three years, Furuno Electric has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Furuno Electric's EPS grew from JP¥254 to JP¥525, over the previous 12 months. It's a rarity to see 106% year-on-year growth like that.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Furuno Electric shareholders can take confidence from the fact that EBIT margins are up from 8.1% to 11%, and revenue is growing. That's great to see, on both counts.

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.

Check out our latest analysis for Furuno Electric

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Furuno Electric's forecast profits?

Are Furuno Electric Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Furuno Electric shares worth a considerable sum. To be specific, they have JP¥3.6b worth of shares. This considerable investment should help drive long-term value in the business. Despite being just 1.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Furuno Electric Worth Keeping An Eye On?

Furuno Electric's earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Furuno Electric for a spot on your watchlist. However, before you get too excited we've discovered 2 warning signs for Furuno Electric that you should be aware of.

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.