If you are interested in profitable, growing companies Ferrari (NYSE:RACE) since its October 2016 IPO is the standout stock in the automotive sector, it is The Aristocrat.
While that does not make its shares worth buying at any price, you cannot deny that successful capitalism requires profit, eventually.
In comparison, loss making companies act like Tesla (NASDAQ:TSLA), a dry sponge for capital, but unlike the sponge they do not always produce something when squeezed.
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows EPS eventually. It is no surprise, then, that we like to invest in companies with EPS growth. And Ferrari has grown EPS by 40% per year, over the last 3 years. That kind of growth never lasts long, but it worth watching and being a part of it when it occurs.
We like to see Top-line growth as an indication that growth is sustainable, and look for a high EBIT margin to point to a competitive moat. Ferrari maintained stable EBIT margins over the last year, all while growing revenue 3.0% to €3.5-B. That is a real positive.
Since Ferrari has a market capitalization over $38-B, you might not expect insiders to hold a large percentage of shares. But be reassured they are loyal and they have invested in the company.
They have a mountain of wealth invested in it, currently valued at €3.1-B. That level of participation is very encouraging, as ensure shareholder that the leaders of the company are experiencing success, or failure, with the stock.
The CEO of Ferrari only received €270-K in total compensation for the year ending December 2018. That is well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give a shareholder more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
The Big Q: Should You Add Ferrari To Your Watchlist Now?
Ferrari’s EPS have taken off like a rocket aimed at outer-space. The sweetener is that insiders have a lot of stock, and the CEO remuneration is reasonable. The strong EPS improvement suggests the businesses is purring along. Ferrari ticks lots of boxes, so Yes, RACE well worth further consideration.
Note: Last week Goldman Sachs upgraded Ferrari to ‘buy‘ from ‘neutral ‘calling the stock’s pullback a good “entry point.” “We upgrade Ferrari from Neutral to Buy, offering 15% upside to our new price targets of 182. Our thesis, outlined in Life of Luxury published last month, is fundamentally unchanged post Ferrari’s in-line 2-Q results. We view the stock’s recent pullback (-7.5% since July 16) as a good entry point in here.
Enzo Ferrari’s iconic Italian Supercar manufacturer claimed the title according to the latest Brand Finance Global 500 2019 report launched at the World Economic Forum in Davos.
HeffX-LTN overall technical outlook for RACE is Neutral to Bullish, overhead resistance is at 156.06, and support at 149.35, all Key indicators are flashing Neutral to Bearish in here. Ferrari finished at 153.22, -1.89 Friday in NY
Ferrari will continue to create value in the long term. Ferrari is a quality 1st long term investment, and I see it at 200/share in that frame.
Have a terrific weekend