If EPS Growth Is Important To You, Taka Jewellery Holdings (Catalist:42L) Presents An Opportunity

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Taka Jewellery Holdings (Catalist:42L). 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 Taka Jewellery Holdings

How Fast Is Taka Jewellery Holdings Growing Its Earnings Per Share?

Over the last three years, Taka Jewellery Holdings has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Taka Jewellery Holdings' EPS skyrocketed from S$0.011 to S$0.016, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 53%.

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. While we note Taka Jewellery Holdings achieved similar EBIT margins to last year, revenue grew by a solid 40% to S$146m. That's progress.

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.

Since Taka Jewellery Holdings is no giant, with a market capitalisation of S$39m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Taka Jewellery Holdings Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in Taka Jewellery Holdings will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 89% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. To give you an idea, the value of insiders' holdings in the business are valued at S$35m at the current share price. So there's plenty there to keep them focused!

Is Taka Jewellery Holdings Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Taka Jewellery Holdings' strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Taka Jewellery Holdings' continuing strength. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Taka Jewellery Holdings (1 is significant) you should be aware of.

Although Taka Jewellery Holdings certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Singaporean companies that not only boast of strong growth but have also seen recent insider buying..

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.