Does Coca-Cola (NYSE:KO) Deserve A Spot On Your Watchlist?
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. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’ A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like Coca-Cola (NYSE:KO), which has not only revenues, but also profits. While profit isn’t the sole metric that should be considered when investing, it’s worth recognizing businesses that can consistently produce it.
Coca-Cola’s Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Coca-Cola has grown EPS by 14% per year. That growth rate is fairly good, assuming the company can keep it up.
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. EBIT margins for Coca-Cola remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.0% to US$46b. That’s progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
Fortunately, we’ve got access to analyst forecasts of Coca-Cola’s future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Coca-Cola Insiders Aligned With All Shareholders?
Owing to the size of Coca-Cola, we wouldn’t expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it’s pleasing to see that there are still incentives to align their actions with the shareholders. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$1.8b. We note that this amounts to 0.7% of the company, which may be small owing to the sheer size of Coca-Cola but it’s still worth mentioning. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.
Should You Add Coca-Cola To Your Watchlist?
As previously touched on, Coca-Cola is a growing business, which is encouraging. If that’s not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. It is worth noting though that we have found 2 warning signs for Coca-Cola that you need to take into consideration.
Although Coca-Cola certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.
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.
