Here's Why I Think Coca-Cola HBC (LON:CCH) Is An Interesting Stock

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 completely lacks a track record of revenue and profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like Coca-Cola HBC (LON:CCH). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Coca-Cola HBC

How Fast Is Coca-Cola HBC Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Coca-Cola HBC has grown EPS by 5.2% per year. While that sort of growth rate isn't amazing, it does show the business is growing.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. This approach makes Coca-Cola HBC look pretty good, on balance; although revenue is flattish, EBIT margins improved from 9.7% to 12% in the last year. That's a real positive.

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.

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

Are Coca-Cola HBC Insiders Aligned With All Shareholders?

Since Coca-Cola HBC has a market capitalization of UK£9.6b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth €82m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.

Should You Add Coca-Cola HBC To Your Watchlist?

One important encouraging feature of Coca-Cola HBC is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. You should always think about risks though. Case in point, we've spotted 3 warning signs for Coca-Cola HBC you should be aware of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.