The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. 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 Koninklijke Ahold Delhaize (AMS:AD), 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.
Our analysis indicates that AD is potentially undervalued!
How Quickly Is Koninklijke Ahold Delhaize Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Koninklijke Ahold Delhaize grew its EPS by 16% per year. That growth rate is fairly good, assuming the company can keep it up.
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 Koninklijke Ahold Delhaize achieved similar EBIT margins to last year, revenue grew by a solid 12% to €84b. That's a real positive.
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 Koninklijke Ahold Delhaize?
Are Koninklijke Ahold Delhaize 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Even though some insiders sold down their holdings, their actions speak louder than words with €679k more invested than sold by people who know they company best. You could argue that level of buying implies genuine confidence in the business. Zooming in, we can see that the biggest insider purchase was by company insider N. Knight for €952k worth of shares, at about €28.35 per share.
The good news, alongside the insider buying, for Koninklijke Ahold Delhaize bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at €22m. This considerable investment should help drive long-term value in the business. Despite being just 0.08% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Is Koninklijke Ahold Delhaize Worth Keeping An Eye On?
As previously touched on, Koninklijke Ahold Delhaize is a growing business, which is encouraging. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for your watchlist - and arguably a research priority. Still, you should learn about the 1 warning sign we've spotted with Koninklijke Ahold Delhaize.
Keen growth investors love to see insider buying. Thankfully, Koninklijke Ahold Delhaize 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.
Valuation is complex, but we're helping make it simple.
Find out whether Koninklijke Ahold Delhaize is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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.