It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.
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 JDE Peet's (AMS:JDEP). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
JDE Peet's' Improving Profits
Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's easy to see why many investors focus in on EPS growth. JDE Peet's' EPS shot up from €1.14 to €1.77; a result that's bound to keep shareholders happy. That's a fantastic gain of 55%.
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. While we note JDE Peet's achieved similar EBIT margins to last year, revenue grew by a solid 15% to €7.6b. That's a real positive.
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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for JDE Peet's' future EPS 100% free.
Are JDE Peet's Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Although we did see some insider selling (worth €24m) this was overshadowed by a mountain of buying, totalling €47m in just one year. We find this encouraging because it suggests they are optimistic about JDE Peet's'future. We also note that it was the Non-Executive Chairman, Olivier C. Goudet, who made the biggest single acquisition, paying €24m for shares at about €28.64 each.
The good news, alongside the insider buying, for JDE Peet's bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enviable stake in the company, worth €467m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
Is JDE Peet's Worth Keeping An Eye On?
For growth investors, JDE Peet's' raw rate of earnings growth is a beacon in the night. Furthermore, company insiders have been adding to their significant stake in the company. These things considered, this is one stock worth watching. Still, you should learn about the 1 warning sign we've spotted with JDE Peet's.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of JDE Peet's, you'll probably love this free list of growing companies that insiders are buying.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here