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華爾街日報Does TWOSTONE&Sons (TSE:7352) Deserve A Spot On Your Watchlist?
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. 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 TWOSTONE&Sons (TSE:7352). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide TWOSTONE&Sons with the means to add long-term value to shareholders.
TWOSTONE&Sons' Earnings Per Share Are 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. That means EPS growth is considered a real positive by most successful long-term investors. TWOSTONE&Sons' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 52%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
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 TWOSTONE&Sons remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 27% to JP¥18b. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
See our latest analysis for TWOSTONE&Sons
Since TWOSTONE&Sons is no giant, with a market capitalisation of JP¥38b, you should definitely check its cash and debt before getting too excited about its prospects.
Are TWOSTONE&Sons Insiders Aligned With All Shareholders?
Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that TWOSTONE&Sons insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 76%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. With that sort of holding, insiders have about JP¥29b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!
Does TWOSTONE&Sons Deserve A Spot On Your Watchlist?
TWOSTONE&Sons' earnings per share have been soaring, with growth rates sky high. 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. Based on the sum of its parts, we definitely think its worth watching TWOSTONE&Sons very closely. You still need to take note of risks, for example - TWOSTONE&Sons has 1 warning sign we think 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.