Should You Be Adding Lacto Japan (TSE:3139) To Your Watchlist Today?

Simply Wall St · 04/15 21:44

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Lacto Japan (TSE:3139). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

We've discovered 3 warning signs about Lacto Japan. View them for free.

How Fast Is Lacto Japan Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Lacto Japan's EPS has grown 21% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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 Lacto Japan remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 11% to JP¥177b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
TSE:3139 Earnings and Revenue History April 15th 2025

Check out our latest analysis for Lacto Japan

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Lacto Japan.

Are Lacto Japan 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 Lacto Japan insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at JP¥5.3b. This considerable investment should help drive long-term value in the business. That amounts to 16% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add Lacto Japan To Your Watchlist?

For growth investors, Lacto Japan's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Lacto Japan's continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. However, before you get too excited we've discovered 3 warning signs for Lacto Japan (1 shouldn't be ignored!) that you should be aware of.

Although Lacto Japan 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.