If EPS Growth Is Important To You, Almedio (TSE:7859) Presents An Opportunity

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Almedio (TSE:7859). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Almedio with the means to add long-term value to shareholders.

View our latest analysis for Almedio

Almedio's Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. It is awe-striking that Almedio's EPS went from JP¥17.08 to JP¥82.30 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. This could point to the business hitting a point of inflection.

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. Almedio shareholders can take confidence from the fact that EBIT margins are up from 11% to 27%, and revenue is growing. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Almedio isn't a huge company, given its market capitalisation of JP¥18b. That makes it extra important to check on its balance sheet strength.

Are Almedio Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Almedio insiders have a significant amount of capital invested in the stock. To be specific, they have JP¥2.5b worth of shares. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 14% of the shares on issue for the business, an appreciable amount considering the market cap.

Is Almedio Worth Keeping An Eye On?

Almedio'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. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Almedio for a spot on your watchlist. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Almedio (1 is a bit concerning) you should be aware of.

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.