Here’s why I think L’Occitane International (HKG: 973) is an interesting stock

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Some have more money than common sense, they say, so even businesses with no income, no profit, and a record of failure can easily find investors. But as Warren Buffett said, “If you’ve been playing poker for half an hour and you still don’t know what’s the noise, you’re the noise.” When buying such historical stocks, investors are too often the fools.

In the age of investing in the blue sky of tech stocks, my choice may seem old-fashioned; I always prefer profitable businesses like L’Occitane International (HKG: 973). While profit isn’t necessarily social good, it’s easy to admire a business that can consistently produce it. Conversely, a loss-making company has yet to prove itself with profit, and eventually the sweet milk of external capital can turn sour.

Check out our latest review for L’Occitane International

How fast is L’Occitane International increasing its earnings per share?

As one of my mentors once told me, the stock price tracks earnings per share (EPS). Therefore, there are a lot of investors who like to buy stocks in companies with growing EPS. L’Occitane International has succeeded in increasing its EPS by 17% per year, over three years. It’s a great rate, if the company can keep it up.

I like to look at earnings before interest and tax margins (EBIT), as well as revenue growth, to get another idea of ​​how well the business is growing. Unfortunately, L’Occitane International’s revenue fell 6.5% last year, but the bright side is EBIT margins improved from 12% to 16%. It is far from ideal.

In the graph below, you can see how the company has increased its profit and revenue over time. Click on the graph to see the exact numbers.

SEHK: 973 Revenue and Revenue History Oct 29, 2021

In investing, as in life, the future matters more than the past. So why not watch this free interactive visualization of L’Occitane International forecast benefits?

Are L’Occitane International insiders aligned with all shareholders?

We wouldn’t expect to see insiders owning a significant percentage of a HK $ 41 billion company like L’Occitane International. But we are reassured by the fact that they are investors in the company. To be precise, they have 108 million euros in shares. This shows strong buy-in and may indicate a belief in business strategy. Even though that’s only about 0.3% of the business, it’s enough money to indicate the alignment between the company’s executives and common shareholders.

Should you add L’Occitane International to your watchlist?

An important and encouraging feature of L’Occitane International is that it increases its profits. If that’s not enough, there are also the fairly noticeable levels of insider ownership. I like this combination, for example. So yes, I think the stock is worth watching. However, before you get too excited, we found out 1 warning sign for L’Occitane International that you need to be aware of.

While L’Occitane International certainly looks good to me, I would like more insiders to buy back shares. If you also like to see insider buying then this free list of growing companies that insiders are buying, might be exactly what you are looking for.

Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.

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