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.’ Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
So if this idea of high risk and high reward doesn’t suit, you might be more interested in profitable, growing companies, like Mondelez International (NASDAQ:MDLZ). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Mondelez International with the means to add long-term value to shareholders.
View our latest analysis for Mondelez International
How Quickly Is Mondelez International Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Mondelez International managed to grow EPS by 6.4% per year, over three years. While that sort of growth rate isn’t anything to write home about, it does show the business is growing.
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. The good news is that Mondelez International is growing revenues, and EBIT margins improved by 4.7 percentage points to 20%, over the last year. Ticking those two boxes is a good sign of growth, in our book.
You can take a look at the company’s revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
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 Mondelez International’s future profits.
Are Mondelez International Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$91b company like Mondelez International. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$131m. We note that this amounts to 0.1% of the company, which may be small owing to the sheer size of Mondelez International 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.
Does Mondelez International Deserve A Spot On Your Watchlist?
One important encouraging feature of Mondelez International is that it is growing profits. If that’s not enough on its own, there is also the rather notable levels of insider ownership. The combination definitely favoured by investors so consider keeping the company on a watchlist. We should say that we’ve discovered 1 warning sign for Mondelez International that you should be aware of before investing here.
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 significant insider holdings.
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.
Credit: Source link
