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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 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 Coca-Cola HBC (LON:CCH). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Coca-Cola HBC with the means to add long-term value to shareholders.
See our latest analysis for Coca-Cola HBC
How Fast Is Coca-Cola HBC Growing?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Coca-Cola HBC has grown EPS by 15% per year. That growth rate is fairly good, assuming the company can keep it up.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Coca-Cola HBC remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 11% to €10b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Coca-Cola HBC?
Are Coca-Cola HBC Insiders Aligned With All Shareholders?
Owing to the size of Coca-Cola HBC, 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. With a whopping €76m worth of shares as a group, insiders have plenty riding on the company's success. That's certainly enough to let shareholders know that management will be very focussed on long term growth.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Coca-Cola HBC, with market caps over €7.5b, is about €5.2m.