Does Davide Campari-Milano (BIT:CPR) Deserve A Spot On Your Watchlist?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Davide Campari-Milano (BIT:CPR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Davide Campari-Milano with the means to add long-term value to shareholders.

Check out our latest analysis for Davide Campari-Milano

Davide Campari-Milano's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Over the last three years, Davide Campari-Milano has grown EPS by 6.7% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

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. The music to the ears of Davide Campari-Milano shareholders is that EBIT margins have grown from 19% to 21% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

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.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Davide Campari-Milano?

Are Davide Campari-Milano Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We do note that, in the last year, insiders sold €3.9m worth of shares. But that's far less than the €25m insiders spent purchasing stock. We find this encouraging because it suggests they are optimistic about Davide Campari-Milano'sfuture. It is also worth noting that it was Non-Executive Chairman Luca Garavoglia who made the biggest single purchase, worth €8.2m, paying €9.00 per share.

Does Davide Campari-Milano Deserve A Spot On Your Watchlist?

One positive for Davide Campari-Milano is that it is growing EPS. That's nice to see. While some companies are struggling to grow EPS, Davide Campari-Milano seems free from that morose affliction. The cherry on top is the insider share purchases, which provide an extra impetus to keep and eye on this stock, at the very least. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Davide Campari-Milano.

Keen growth investors love to see insider buying. Thankfully, Davide Campari-Milano isn't the only one. You can see a a free list of them here.

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.