With EPS Growth And More, Fresh Del Monte Produce (NYSE:FDP) Makes An Interesting Case
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. 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.
In contrast to all that, many investors prefer to focus on companies like Fresh Del Monte Produce (NYSE:FDP), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
See our latest analysis for Fresh Del Monte Produce
Fresh Del Monte Produce's Improving Profits
Fresh Del Monte Produce has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Fresh Del Monte Produce's EPS shot up from US$1.44 to US$2.36; a result that's bound to keep shareholders happy. That's a commendable gain of 64%.
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. It was a year of stability for Fresh Del Monte Produce as both revenue and EBIT margins remained have been flat over the past year. That's not a major concern but nor does it point to the long term growth we like to see.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Fresh Del Monte Produce's balance sheet strength, before getting too excited.
Are Fresh Del Monte Produce Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Fresh Del Monte Produce followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$266m. That equates to 22% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.
Is Fresh Del Monte Produce Worth Keeping An Eye On?
For growth investors, Fresh Del Monte Produce's raw rate of earnings growth is a beacon in the night. 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. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. We don't want to rain on the parade too much, but we did also find 2 warning signs for Fresh Del Monte Produce (1 makes us a bit uncomfortable!) that you need to be mindful of.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by recent insider purchases.
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.
