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Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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. 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.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Coles Group (ASX:COL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Coles Group with the means to add long-term value to shareholders.
View our latest analysis for Coles Group
Coles Group's Improving Profits
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's easy to see why many investors focus in on EPS growth. Over the last year, Coles Group increased its EPS from AU$0.78 to AU$0.84. That amounts to a small improvement of 8.2%.
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. EBIT margins for Coles Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 7.5% to AU$44b. That's encouraging news for the company!
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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Coles Group's forecast profits?
Are Coles Group Insiders Aligned With All Shareholders?
Owing to the size of Coles Group, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. As a matter of fact, their holding is valued at AU$51m. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.2%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.