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. 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 Japan Foods Holding (Catalist:5OI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Japan Foods Holding with the means to add long-term value to shareholders.
View our latest analysis for Japan Foods Holding
How Fast Is Japan Foods Holding 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Japan Foods Holding's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 59%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Japan Foods Holding is growing revenues, and EBIT margins improved by 10.8 percentage points to 4.7%, over the last year. That's great to see, on both counts.
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.
Since Japan Foods Holding is no giant, with a market capitalisation of S$71m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Japan Foods Holding 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 we're pleased to report that Japan Foods Holding insiders own a meaningful share of the business. Indeed, with a collective holding of 80%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. In terms of absolute value, insiders have S$57m invested in the business, at the current share price. So there's plenty there to keep them focused!