Is Now The Time To Put Koyou Rentia (TSE:7081) On Your Watchlist?

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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Koyou Rentia (TSE:7081). 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 Quickly Is Koyou Rentia Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. Over the last three years, Koyou Rentia has grown EPS by 17% per year. That's a good rate of growth, if it can be sustained.

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. Koyou Rentia shareholders can take confidence from the fact that EBIT margins are up from 6.2% to 8.6%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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.

See our latest analysis for Koyou Rentia

Since Koyou Rentia is no giant, with a market capitalisation of JP¥15b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Koyou Rentia 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 those who are interested in Koyou Rentia will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 73% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about JP¥11b riding on the stock, at current prices. That's nothing to sneeze at!

Is Koyou Rentia Worth Keeping An Eye On?

One positive for Koyou Rentia is that it is growing EPS. That's nice to see. To add an extra spark to the fire, significant insider ownership in the company is another highlight. These two factors are a huge highlight for the company which should be a strong contender your watchlists. It is worth noting though that we have found 1 warning sign for Koyou Rentia that you need to take into consideration.

Although Koyou Rentia 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.