Here’s Why Christian Dior (EPA:CDI) Has Caught The Eye Of Investors

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. 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.

So if this idea of high risk and high reward doesn’t suit, you might be more interested in profitable, growing companies, like Christian Dior (EPA:CDI). 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 Christian Dior

Christian Dior’s Earnings Per Share Are 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Christian Dior has grown EPS by 27% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. While we note Christian Dior achieved similar EBIT margins to last year, revenue grew by a solid 32% to €72b. That’s progress.

The chart below shows how the company’s bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

While it’s always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Christian Dior’s balance sheet strength, before getting too excited.

Are Christian Dior Insiders Aligned With All Shareholders?

Since Christian Dior has a market capitalisation of €139b, we wouldn’t expect insiders to hold a large percentage of shares. But thanks to their investment in the company, it’s pleasing to see that there are still incentives to align their actions with the shareholders. We note that their impressive stake in the company is worth €796m. We note that this amounts to 0.6% of the company, which may be small owing to the sheer size of Christian Dior but it’s still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.

Should You Add Christian Dior To Your Watchlist?

For growth investors, Christian Dior’s raw rate of earnings growth is a beacon in the night. This EPS growth rate is something the company should be proud of, and so it’s no surprise that insiders are holding on to a considerable chunk of shares. The growth and insider confidence is looked upon well and so it’s worthwhile to investigate further with a view to discern the stock’s true value. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Christian Dior.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with 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.