Should You Be Adding Keurig Dr Pepper (NASDAQ:KDP) To Your Watchlist Today?

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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Keurig Dr Pepper (NASDAQ:KDP), 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.

Check out our latest analysis for Keurig Dr Pepper

How Fast Is Keurig Dr Pepper Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Keurig Dr Pepper managed to grow EPS by 15% per year, over three years. That's a pretty good rate, if the company can sustain it.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The music to the ears of Keurig Dr Pepper shareholders is that EBIT margins have grown from 19% to 23% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Keurig Dr Pepper?

Are Keurig Dr Pepper Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.

Although we did see some insider selling (worth US$3.8m) this was overshadowed by a mountain of buying, totalling US$23m in just one year. This adds to the interest in Keurig Dr Pepper because it suggests that those who understand the company best, are optimistic. Zooming in, we can see that the biggest insider purchase was by Director G. Harf for US$5.0m worth of shares, at about US$29.10 per share.

On top of the insider buying, it's good to see that Keurig Dr Pepper insiders have a valuable investment in the business. We note that their impressive stake in the company is worth US$567m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Does Keurig Dr Pepper Deserve A Spot On Your Watchlist?

One important encouraging feature of Keurig Dr Pepper 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. It is worth noting though that we have found 2 warning signs for Keurig Dr Pepper (1 is significant!) that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Keurig Dr Pepper, you'll probably love this curated collection of companies in the US that have an attractive valuation alongside insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.