Yahoo Finance Is Now The Time To Put Coral Products (LON:CRU) On Your Watchlist?
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 currently lacks a track record of revenue and 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.
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 Coral Products (LON:CRU). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Coral Products
Coral Products' Improving Profits
In the last three years Coral Products' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Coral Products' EPS has risen over the last 12 months, growing from UK£0.012 to UK£0.014. This amounts to a 17% 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. While Coral Products did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future may hold further growth, especially if EBIT margins can remain steady.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Coral Products isn't a huge company, given its market capitalisation of UK£15m. That makes it extra important to check on its balance sheet strength.
Are Coral Products 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
One positive for Coral Products, is that company insiders spent UK£22k acquiring shares in the last year. While this investment may be modest, it is great considering the lack of insider selling. We also note that it was the Executive Chairman, Joseph Grimmond, who made the biggest single acquisition, paying UK£9.2k for shares at about UK£0.18 each.
It's commendable to see that insiders have been buying shares in Coral Products, but there is more evidence of shareholder friendly management. Namely, Coral Products has a very reasonable level of CEO pay. Our analysis has discovered that the median total compensation for the CEOs of companies like Coral Products with market caps under UK£158m is about UK£279k.
The CEO of Coral Products only received UK£108k in total compensation for the year ending April 2022. First impressions seem to indicate a compensation policy that is favourable to shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.
Should You Add Coral Products To Your Watchlist?
One positive for Coral Products is that it is growing EPS. That's nice to see. And there's more to Coral Products, with the insider buying and modest CEO pay being a great look for those with an eye on the company. The sum of all that, points to a quality business, and a genuine prospect for further research. You should always think about risks though. Case in point, we've spotted 5 warning signs for Coral Products you should be aware of, and 1 of them is significant.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Coral Products, you'll probably love this free list of growing companies that insiders are buying.
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.
