Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Coca-Cola Consolidated (NASDAQ:COKE). 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.
How Fast Is Coca-Cola Consolidated 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Coca-Cola Consolidated has grown EPS by 34% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Coca-Cola Consolidated shareholders can take confidence from the fact that EBIT margins are up from 3.9% to 7.4%, and revenue is growing. That's great to see, on both counts.
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.NasdaqGS:COKE Earnings and Revenue History June 11th 2021
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are Coca-Cola Consolidated Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Coca-Cola Consolidated shares worth a considerable sum. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$974m. That equates to 24% of the company, making insiders powerful and aligned with other shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.
Does Coca-Cola Consolidated Deserve A Spot On Your Watchlist?
You can't deny that Coca-Cola Consolidated has grown its earnings per share at a very impressive rate. That's attractive. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. Still, you should learn about the 2 warning signs we've spotted with Coca-Cola Consolidated .
Although Coca-Cola Consolidated certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
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. 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
In This StoryCOKE
Latest Nasdaq-Listed Companies Videos
- Trade Alert: The President Of United Airlines Holdings, Inc. (NASDAQ:UAL), Brett Hart, Has Sold Some Shares Recently
- Vaxart, Inc. (NASDAQ:VXRT) Is Expected To Breakeven In The Near Future
- A MiMedx Group, Inc. (NASDAQ:MDXG) insider lowered their holding by 11% earlier this year
- Investors push CrowdStrike Holdings (NASDAQ:CRWD) 5.8% lower this week, company's increasing losses might be to blame