Is Now The Time To Put Tapestry (NYSE:TPR) On Your Watchlist?

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Tapestry (NYSE:TPR). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Tapestry

Tapestry's Improving Profits

Tapestry 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. So it would be better to isolate the growth rate over the last year for our analysis. Tapestry's EPS skyrocketed from US$3.24 to US$4.12, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 27%.

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. It seems Tapestry is pretty stable, since revenue and EBIT margins are pretty flat year on year. While this doesn't ring alarm bells, it may not meet the expectations of growth-minded investors.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

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

Are Tapestry Insiders Aligned With All Shareholders?

Since Tapestry has a market capitalisation of US$7.3b, we wouldn't expect insiders to hold a large percentage of shares. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. As a matter of fact, their holding is valued at US$30m. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.4%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Does Tapestry Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Tapestry's strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Before you take the next step you should know about the 2 warning signs for Tapestry that we have uncovered.

Although Tapestry certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.