The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors.  Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.  A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Keurig Dr Pepper (NASDAQ:KDP), 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 Keurig Dr Pepper with the means to add long-term value to shareholders.

How Quickly Is Keurig Dr Pepper Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually.  That means EPS growth is considered a real positive by most successful long-term investors.   We can see that in the last three years Keurig Dr Pepper grew its EPS by 15% per year.   That's a pretty good rate, if the company can sustain it.  

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.    Keurig Dr Pepper shareholders can take confidence from the fact that EBIT margins are up from 19% to 23%, and revenue is growing.  Both of which are great metrics to check off for potential growth.  

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.

NasdaqGS:KDP Earnings and Revenue History May 10th 2024

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Keurig Dr Pepper's forecast profits?

Are Keurig Dr Pepper Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market.  Because often, the purchase of stock is a sign that the buyer views it as undervalued.  However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The US$4.2m worth of shares that insiders sold during the last 12 months pales in comparison to the US$23m they spent on acquiring shares in the company.  This adds to the interest in Keurig Dr Pepper because it suggests that those who understand the company best, are optimistic.     It is also worth noting that it was Director G. Harf who made the biggest single purchase, worth US$5.0m, paying US$29.10 per share.  

The good news, alongside the insider buying, for Keurig Dr Pepper bulls is that insiders (collectively) have a meaningful investment in the stock.    We note that their impressive stake in the company is worth US$568m.   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.  

Should You Add Keurig Dr Pepper To Your Watchlist?

One important encouraging feature of Keurig Dr Pepper is that it is growing profits.   In addition, insiders have been busy adding to their sizeable holdings in the company.  That makes the company a prime candidate for your watchlist - and arguably a research priority.     It's still necessary to consider the ever-present spectre of investment risk.   We've identified 2 warning signs with Keurig Dr Pepper (at least 1 which is a bit concerning)  , and understanding them should be part of your investment process.  

Keen growth investors love to see insider buying. Thankfully, Keurig Dr Pepper isn't the only one. You can see a a curated list of  companies which have exhibited consistent growth accompanied by recent insider 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.