Here's Why Pirelli & C (BIT:PIRC) Has Caught The Eye Of Investors

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Pirelli & C (BIT:PIRC), 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 Pirelli & C with the means to add long-term value to shareholders.

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How Fast Is Pirelli & C Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. In previous twelve months, Pirelli & C's EPS has risen from €0.43 to €0.46. That's a modest gain of 5.8%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Pirelli & C's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Pirelli & C remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 2.0% to €7.1b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

View our latest analysis for Pirelli & C

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Pirelli & C?

Are Pirelli & C 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

One shining light for Pirelli & C is the serious outlay one insider has made to buy shares, in the last year. In one fell swoop, Executive Vice Chairman Marco Provera, spent €6.1m, at a price of €6.14 per share. Big insider buys like that are a rarity and should prompt discussion on the merits of the business.

The good news, alongside the insider buying, for Pirelli & C bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have €26m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 0.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add Pirelli & C To Your Watchlist?

One positive for Pirelli & C is that it is growing EPS. That's nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Pirelli & C that you should be aware of.

Keen growth investors love to see insider activity. Thankfully, Pirelli & C isn't the only one. You can see a a curated list of Italian companies which have exhibited consistent growth accompanied by high insider ownership.

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.