Do Coffee Holding's (NASDAQ:JVA) Earnings Warrant Your Attention?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Coffee Holding (NASDAQ:JVA). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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Coffee Holding's Improving Profits

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So a growing EPS generally brings attention to a company in the eyes of prospective investors. Commendations have to be given in seeing that Coffee Holding grew its EPS from US$0.068 to US$0.65, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. This could point to the business hitting a point of inflection.

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 good news is that Coffee Holding is growing revenues, and EBIT margins improved by 5.2 percentage points to 5.8%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

See our latest analysis for Coffee Holding

Coffee Holding isn't a huge company, given its market capitalisation of US$25m. That makes it extra important to check on its balance sheet strength.

Are Coffee Holding Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. The median total compensation for CEOs of companies similar in size to Coffee Holding, with market caps under US$200m is around US$652k.

The Coffee Holding CEO received US$344k in compensation for the year ending October 2024. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Is Coffee Holding Worth Keeping An Eye On?

Coffee Holding's earnings have taken off in quite an impressive fashion. With increasing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. At the same time the reasonable CEO compensation reflects well on the board of directors. It will definitely require further research to be sure, but it does seem that Coffee Holding has the hallmarks of a quality business; and that would make it well worth watching. However, before you get too excited we've discovered 1 warning sign for Coffee Holding that you should be aware of.

Although Coffee Holding certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

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.