Investors are often drawn to the idea of ​​discovering “the next big thing,” even if that means buying “story stocks” without generating revenue or even profit. Unfortunately, the likelihood of these high-risk investments ever paying off is often very low, and many investors are learning their lesson. Loss-making companies can act like a sponge that soaks up capital, so investors should be careful not to throw good money after bad.

In contrast, many investors prefer to focus on companies such as Mitsubishi Heavy Industries (TSE:7011), which not only generates revenue but also profits. While this does not necessarily mean that the company is undervalued, the company’s profitability is enough to justify some appreciation in value – especially if it is growing.

Check out our latest analysis for Mitsubishi Heavy Industries

How quickly does Mitsubishi Heavy Industries grow earnings per share?

If a company can grow its earnings per share (EPS) long enough, its share price should eventually follow. Therefore, it makes sense for experienced investors to pay close attention to earnings per share when analyzing investments. It is certainly nice to see that Mitsubishi Heavy Industries has managed to grow earnings per share by 28% per year over three years. As a general rule, we would say that if a company can keep up The Kind of growth, shareholders will be beaming.

One way to check a company’s growth is to look at how its revenue and earnings before interest and tax (EBIT) margins are changing. Mitsubishi Heavy Industries’ EBIT margins remained relatively flat over the last year, yet the company can be proud to report an 11% increase in revenue to JP¥4.8 trillion for the period. That’s progress.

You can see the company’s revenue and earnings growth trend in the graph below. Click on the graph to see the exact numbers.

Fortunately, we have access to analyst forecasts for Mitsubishi Heavy Industries. Future Profits. You can make your own predictions without looking, or you can take a look at the predictions of the professionals.

Are Mitsubishi Heavy Industries insiders on the same page as all shareholders?

We wouldn’t expect insiders to own a large stake in a 6.3 tonne company like Mitsubishi Heavy Industries. But we are reassured that they are investors in the company. In particular, they own an enviable JP¥24 billion stake in the company. We note that this represents 0.4% of the company, which may be small given the sheer size of Mitsubishi Heavy Industries, but is still worth mentioning. This should still be a great incentive for management to maximise shareholder value.

Is Mitsubishi Heavy Industries worth keeping an eye on?

If you believe that share price follows earnings per share, you should definitely take a closer look at Mitsubishi Heavy Industries’ strong EPS growth. This EPS growth rate is something the company can be proud of, and so it’s no surprise that insiders own a sizable portion of the shares. The bottom line is that solid EPS growth and company insiders aligned with shareholders point to a company worthy of further investigation. However, you also need to consider the risks, for example: Mitsubishi Heavy Industries has 1 warning sign In our opinion, you should be aware of this.

While it may be worth investing in stocks without rising earnings and without insider buying, for investors who value these key metrics, we have compiled a carefully curated list of Japanese companies with promising growth potential and insider confidence.

Please note that the insider transactions discussed in this article are reportable transactions in the respective jurisdiction.

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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.