Yahoo Finance Should You Be Adding Compass Group (LON:CPG) To Your Watchlist Today?
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. 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. 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.
In contrast to all that, many investors prefer to focus on companies like Compass Group (LON:CPG), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Compass Group with the means to add long-term value to shareholders.
View our latest analysis for Compass Group
How Fast Is Compass Group Growing Its Earnings Per Share?
Compass Group has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Compass Group boosted its trailing twelve month EPS from US$0.88 to US$1.04, in the last year. That's a 18% gain; respectable growth in the broader scheme of things.
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 Compass Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 15% to US$41b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Compass Group's forecast profits?
Are Compass Group 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Not only did Compass Group insiders refrain from selling stock during the year, but they also spent US$91k buying it. This is a good look for the company as it paints an optimistic picture for the future. It is also worth noting that it was Independent Non-Executive Director Arlene Isaacs-Lowe who made the biggest single purchase, worth UK£61k, paying UK£21.76 per share.
Along with the insider buying, another encouraging sign for Compass Group is that insiders, as a group, have a considerable shareholding. To be specific, they have US$14m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.03% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Does Compass Group Deserve A Spot On Your Watchlist?
One important encouraging feature of Compass Group is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. It is worth noting though that we have found 1 warning sign for Compass Group that you need to take into consideration.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Compass Group, you'll probably love this curated collection of companies in GB that have an attractive valuation alongside insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.
