Here's Why We Think Cochlear (ASX:COH) Might Deserve Your Attention Today

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.

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

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Cochlear's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, Cochlear has grown EPS by 13% per year. That's a pretty good rate, if the company can sustain it.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Cochlear maintained stable EBIT margins over the last year, all while growing revenue 7.5% to AU$2.3b. 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.

See our latest analysis for Cochlear

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Cochlear's forecast profits?

Are Cochlear Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Not only did Cochlear insiders refrain from selling stock during the year, but they also spent AU$218k buying it. This is a good look for the company as it paints an optimistic picture for the future. It is also worth noting that it was Independent Non-Executive Director Christine McLoughlin who made the biggest single purchase, worth AU$76k, paying AU$306 per share.

On top of the insider buying, it's good to see that Cochlear insiders have a valuable investment in the business. Indeed, they hold AU$71m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.4%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Is Cochlear Worth Keeping An Eye On?

One important encouraging feature of Cochlear is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. Of course, just because Cochlear is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Keen growth investors love to see insider activity. Thankfully, Cochlear isn't the only one. You can see a a curated list of Australian companies which have exhibited consistent growth accompanied by high insider ownership.

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.