Here's Why We Think Yamami (TSE:2820) Is Well Worth Watching

Simply Wall St · 10/17 02:46

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. 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 Yamami (TSE:2820). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Yamami

Yamami's 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Yamami's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 42%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The music to the ears of Yamami shareholders is that EBIT margins have grown from 6.4% to 11% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
TSE:2820 Earnings and Revenue History October 17th 2024

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Yamami?

Are Yamami Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Yamami insiders have a significant amount of capital invested in the stock. Indeed, they hold JP¥4.2b worth of its stock. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 15% of the shares on issue for the business, an appreciable amount considering the market cap.

Is Yamami Worth Keeping An Eye On?

Yamami's earnings have taken off in quite an impressive fashion. 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 Yamami for a spot on your watchlist. It is worth noting though that we have found 1 warning sign for Yamami that you need to take into consideration.

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.