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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Sakae Holdings (SGX:5DO), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Sakae Holdings

How Quickly Is Sakae Holdings Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Sakae Holdings managed to grow EPS by 13% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

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. While revenue is looking a bit flat, the good news is EBIT margins improved by 24.5 percentage points to 16%, in the last twelve months. That's something to smile about.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Sakae Holdings isn't a huge company, given its market capitalisation of S$18m. That makes it extra important to check on its balance sheet strength.

Are Sakae Holdings 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 Sakae Holdings insiders own a meaningful share of the business. To be exact, company insiders hold 86% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Although, with Sakae Holdings being valued at S$18m, this is a small company we're talking about. That means insiders only have S$15m worth of shares, despite the large proportional holding. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Does Sakae Holdings Deserve A Spot On Your Watchlist?

One positive for Sakae Holdings is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination definitely favoured by investors so consider keeping the company on a watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Sakae Holdings (at least 1 which is significant) , and understanding these should be part of your investment process.

Although Sakae Holdings certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.