Should You Be Adding Coca-Cola (NYSE:KO) To Your Watchlist Today?

By
Simply Wall St
Published
November 24, 2021
NYSE:KO
Source: Shutterstock

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Coca-Cola (NYSE:KO). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Coca-Cola

How Fast Is Coca-Cola Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. I, for one, am blown away by the fact that Coca-Cola has grown EPS by 45% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

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. Coca-Cola maintained stable EBIT margins over the last year, all while growing revenue 13% to US$38b. That's progress.

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:KO Earnings and Revenue History November 24th 2021

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

Are Coca-Cola Insiders Aligned With All Shareholders?

Since Coca-Cola has a market capitalization of US$241b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$1.5b. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Should You Add Coca-Cola To Your Watchlist?

Coca-Cola's earnings have taken off like any random crypto-currency did, back in 2017. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind Coca-Cola is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. You should always think about risks though. Case in point, we've spotted 2 warning signs for Coca-Cola you should be aware of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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

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.

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

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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.