It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.
In contrast to all that, many investors prefer to focus on companies like Coca-Cola Consolidated (NASDAQ:COKE), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
How Fast Is Coca-Cola Consolidated Growing Its Earnings Per Share?
Coca-Cola Consolidated 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. As a result, we'll zoom in on growth over the last year, instead. Coca-Cola Consolidated's EPS skyrocketed from US$23.44 to US$29.98, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 28%.
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. While we note Coca-Cola Consolidated achieved similar EBIT margins to last year, revenue grew by a solid 10% to US$5.9b. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are Coca-Cola Consolidated Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own Coca-Cola Consolidated shares worth a considerable sum. Notably, they have an enviable stake in the company, worth US$1.1b. That equates to 25% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.
Should You Add Coca-Cola Consolidated To Your Watchlist?
You can't deny that Coca-Cola Consolidated has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Coca-Cola Consolidated's continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. You should always think about risks though. Case in point, we've spotted 1 warning sign for Coca-Cola Consolidated you should be aware of.
Although Coca-Cola Consolidated 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.
Coca-Cola Consolidated, Inc., together with its subsidiaries, manufactures, markets, and distributes nonalcoholic beverages primarily products of The Coca-Cola Company in the United States.
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|Analysis Area||Score (0-6)|
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Solid track record with adequate balance sheet.