Yahoo Finance Here's Why I Think Coles Group (ASX:COL) Is An Interesting Stock
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 completely lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Coles Group (ASX:COL). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.
Check out our latest analysis for Coles Group
Coles Group's Improving Profits
Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. Coles Group has grown its trailing twelve month EPS from AU$0.77 to AU$0.81, in the last year. That's a modest gain of 5.4%.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Coles Group's EBIT margins are flat but, of some concern, its revenue is actually down. And that does make me a little more cautious of the stock.
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.
Fortunately, we've got access to analyst forecasts of Coles Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Coles Group Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
We do note that, in the last year, insiders sold -AU$9.1k worth of shares. But that's far less than the AU$1.3m insiders spend purchasing stock. This makes me even more interested in Coles Group because it suggests that those who understand the company best, are optimistic. Zooming in, we can see that the biggest insider purchase was by MD, CEO & Director Steven Cain for AU$458k worth of shares, at about AU$11.59 per share.
Along with the insider buying, another encouraging sign for Coles Group is that insiders, as a group, have a considerable shareholding. To be specific, they have AU$32m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 0.2% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Is Coles Group Worth Keeping An Eye On?
One important encouraging feature of Coles Group is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Now, you could try to make up your mind on Coles Group by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
The good news is that Coles Group is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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