Is Now The Time To Put Sinfonia TechnologyLtd (TSE:6507) On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 Sinfonia TechnologyLtd (TSE:6507). 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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Sinfonia TechnologyLtd's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Sinfonia TechnologyLtd has grown EPS by 18% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. While we note Sinfonia TechnologyLtd achieved similar EBIT margins to last year, revenue grew by a solid 14% to JP¥123b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Check out our latest analysis for Sinfonia TechnologyLtd

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Sinfonia TechnologyLtd's future profits.

Are Sinfonia TechnologyLtd 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 Sinfonia TechnologyLtd shares worth a considerable sum. As a matter of fact, their holding is valued at JP¥5.9b. That's a lot of money, and no small incentive to work hard. Despite being just 2.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Sinfonia TechnologyLtd Deserve A Spot On Your Watchlist?

For growth investors, Sinfonia TechnologyLtd's 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. What about risks? Every company has them, and we've spotted 1 warning sign for Sinfonia TechnologyLtd you should know about.

Although Sinfonia TechnologyLtd 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.