Does Fonterra Co-operative Group (NZSE:FCG) Deserve A Spot On Your Watchlist?

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Fonterra Co-operative Group (NZSE:FCG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Fonterra Co-operative Group with the means to add long-term value to shareholders.

Check out our latest analysis for Fonterra Co-operative Group

How Quickly Is Fonterra Co-operative Group Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Fonterra Co-operative Group has managed to grow EPS by 23% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The music to the ears of Fonterra Co-operative Group shareholders is that EBIT margins have grown from 3.8% to 6.8% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

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 profitability drives the upside, prudent investors always check the balance sheet, too.

Are Fonterra Co-operative Group 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. 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.

Fonterra Co-operative Group top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the Director, Andrew Macfarlane, paid NZ$240k to buy shares at an average price of NZ$3.00. Strong buying like that could be a sign of opportunity.

Is Fonterra Co-operative Group Worth Keeping An Eye On?

For growth investors, Fonterra Co-operative Group's raw rate of earnings growth is a beacon in the night. The growth rate should be enticing enough to consider researching the company, and the insider buying is a great added bonus. So on this analysis, Fonterra Co-operative Group is probably worth spending some time on. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Fonterra Co-operative Group that you should be aware of.

The good news is that Fonterra Co-operative Group is not the only growth stock with insider buying. Here's a list of them... 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.