Here's Why Vita Coco Company (NASDAQ:COCO) Has Caught The Eye Of Investors

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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Vita Coco Company (NASDAQ:COCO). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Vita Coco Company with the means to add long-term value to shareholders.

See our latest analysis for Vita Coco Company

How Fast Is Vita Coco Company Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Vita Coco Company has grown EPS by 13% per year. That growth rate is fairly good, assuming the company can keep it up.

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. The music to the ears of Vita Coco Company shareholders is that EBIT margins have grown from 2.9% to 8.3% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Vita Coco Company's forecast profits?

Are Vita Coco Company 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Over the last 12 months Vita Coco Company insiders spent US$121k more buying shares than they received from selling them. On balance, that's a good sign. Zooming in, we can see that the biggest insider purchase was by Co-Founder & Director Ira Liran for US$122k worth of shares, at about US$12.17 per share.

Along with the insider buying, another encouraging sign for Vita Coco Company is that insiders, as a group, have a considerable shareholding. We note that their impressive stake in the company is worth US$195m. That equates to 13% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Martin Roper is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Vita Coco Company, with market caps between US$1.0b and US$3.2b, is around US$5.2m.

The CEO of Vita Coco Company only received US$560k in total compensation for the year ending December 2022. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Is Vita Coco Company Worth Keeping An Eye On?

One important encouraging feature of Vita Coco Company is that it is growing profits. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Vita Coco Company shapes up to industry peers, when it comes to ROE.

Keen growth investors love to see insider buying. Thankfully, Vita Coco Company 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.

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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.