Yahoo Finance Here's Why We Think Coty (NYSE:COTY) Is Well Worth Watching
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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Coty (NYSE:COTY), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for Coty
Coty's Improving Profits
Coty 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. So it would be better to isolate the growth rate over the last year for our analysis. Coty's EPS has risen over the last 12 months, growing from US$0.21 to US$0.24. This amounts to a 12% gain; a figure that shareholders will be pleased to see.
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. The good news is that Coty is growing revenues, and EBIT margins improved by 3.6 percentage points to 11%, over the last year. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
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 Coty's future profits.
Are Coty Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Although we did see some insider selling (worth US$2.0m) this was overshadowed by a mountain of buying, totalling US$5.7m in just one year. This adds to the interest in Coty because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was Independent Director Mariasun Aramburuzabala Larregui who made the biggest single purchase, worth US$5.4m, paying US$10.80 per share.
On top of the insider buying, it's good to see that Coty insiders have a valuable investment in the business. We note that their impressive stake in the company is worth US$518m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.
Does Coty Deserve A Spot On Your Watchlist?
One positive for Coty is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. Even so, be aware that Coty is showing 2 warning signs in our investment analysis , and 1 of those is potentially serious...
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Coty, you'll probably love this curated collection of companies in the US 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.
