Should You Be Adding Pernod Ricard (EPA:RI) To Your Watchlist 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 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Pernod Ricard (EPA:RI). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Pernod Ricard

Pernod Ricard's Improving Profits

Pernod Ricard has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Pernod Ricard boosted its trailing twelve month EPS from €7.71 to €8.93, in the last year. There's little doubt shareholders would be happy with that 16% gain.

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 Pernod Ricard achieved similar EBIT margins to last year, revenue grew by a solid 13% to €12b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of Pernod Ricard's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Pernod Ricard Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a €43b company like Pernod Ricard. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth €288m. This comes in at 0.7% of shares in the company, which is a fair amount of a business of this size. This should still be a great incentive for management to maximise shareholder value.

Should You Add Pernod Ricard To Your Watchlist?

One positive for Pernod Ricard 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. These two factors are a huge highlight for the company which should be a strong contender your watchlists. What about risks? Every company has them, and we've spotted 2 warning signs for Pernod Ricard (of which 1 is concerning!) you should know about.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.