Here's Why MITSUI E&S (TSE:7003) Has Caught The Eye Of Investors

Simply Wall St · 10/14 23:59

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. 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. 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 MITSUI E&S (TSE:7003). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide MITSUI E&S with the means to add long-term value to shareholders.

Check out our latest analysis for MITSUI E&S

MITSUI E&S' Earnings Per Share Are Growing

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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. To the delight of shareholders, MITSUI E&S has achieved impressive annual EPS growth of 43%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. EBIT margins for MITSUI E&S remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 14% to JP¥310b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

earnings-and-revenue-history
TSE:7003 Earnings and Revenue History October 14th 2024

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check MITSUI E&S' balance sheet strength, before getting too excited.

Are MITSUI E&S 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. Shareholders will be pleased by the fact that insiders own MITSUI E&S shares worth a considerable sum. As a matter of fact, their holding is valued at JP¥2.8b. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 2.5%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Is MITSUI E&S Worth Keeping An Eye On?

MITSUI E&S' earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. 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 MITSUI E&S for a spot on your watchlist. Even so, be aware that MITSUI E&S is showing 3 warning signs in our investment analysis , you should know about...

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.