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Here's Why We Think Sakae Holdings (SGX:5DO) Might Deserve Your Attention Today

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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

Check out our latest analysis for Sakae Holdings

How Fast Is Sakae Holdings Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Sakae Holdings has grown EPS by 12% per year. That's a pretty good rate, if the company can sustain it.

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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. Despite the relatively flat revenue figures, shareholders will be pleased to see EBIT margins have grown from -6.2% to -3.3% in the last 12 months. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

earnings-and-revenue-history
earnings-and-revenue-history

Sakae Holdings isn't a huge company, given its market capitalisation of S$22m. That makes it extra important to check on its balance sheet strength.

Are Sakae 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 as you can imagine, the fact that Sakae Holdings insiders own a significant number of shares certainly is appealing. To be exact, company insiders hold 88% 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. Valued at only S$22m Sakae Holdings is really small for a listed company. So this large proportion of shares owned by insiders only amounts to S$20m. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Should You Add Sakae Holdings To Your Watchlist?

As previously touched on, Sakae Holdings is a growing business, which is encouraging. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. These two factors are a huge highlight for the company which should be a strong contender your watchlists. You still need to take note of risks, for example - Sakae Holdings has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in SG with promising growth potential and insider confidence.

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.