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 currently lacks a track record of revenue and 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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Coca-Cola Europacific Partners (AMS:CCEP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Coca-Cola Europacific Partners with the means to add long-term value to shareholders.
How Fast Is Coca-Cola Europacific Partners Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Coca-Cola Europacific Partners has managed to grow EPS by 34% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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 Europacific Partners maintained stable EBIT margins over the last year, all while growing revenue 12% to €18b. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Coca-Cola Europacific Partners' future profits.
Are Coca-Cola Europacific Partners Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a €26b company like Coca-Cola Europacific Partners. But we do take comfort from the fact that they are investors in the company. To be specific, they have €38m worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 0.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Is Coca-Cola Europacific Partners Worth Keeping An Eye On?
If you believe that share price follows earnings per share you should definitely be delving further into Coca-Cola Europacific Partners' strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. We should say that we've discovered 2 warning signs for Coca-Cola Europacific Partners that you should be aware of before investing here.
The beauty of investing is that you can invest in almost 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.
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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.