Here's Why I Think Kellogg (NYSE:K) Might Deserve Your Attention Today

By
Simply Wall St
Published
February 17, 2022
NYSE:K
Source: Shutterstock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like Kellogg (NYSE:K), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Kellogg

How Quickly Is Kellogg Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. Kellogg managed to grow EPS by 4.4% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. While we note Kellogg's EBIT margins were flat over the last year, revenue grew by a solid 3.0% to US$14b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

earnings-and-revenue-history
NYSE:K Earnings and Revenue History February 17th 2022

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

Are Kellogg Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$22b company like Kellogg. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$259m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Does Kellogg Deserve A Spot On Your Watchlist?

One positive for Kellogg is that it is growing EPS. That's nice to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Before you take the next step you should know about the 1 warning sign for Kellogg that we have uncovered.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access 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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