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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
So if you're like me, you might be more interested in profitable, growing companies, like Choice Properties Real Estate Investment Trust (TSE:CHP.UN). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
Choice Properties Real Estate Investment Trust's Improving Profits
In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that Choice Properties Real Estate Investment Trust's EPS went from CA$0.17 to CA$0.65 in just one year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. I note that Choice Properties Real Estate Investment Trust's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. It seems Choice Properties Real Estate Investment Trust is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not bad, but it doesn't point to ongoing future growth, either.
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.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Choice Properties Real Estate Investment Trust.
Are Choice Properties Real Estate Investment Trust Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Although we did see some insider selling (worth -CA$75k) this was overshadowed by a mountain of buying, totalling CA$3.4m in just one year. This makes me even more interested in Choice Properties Real Estate Investment Trust because it suggests that those who understand the company best, are optimistic. Zooming in, we can see that the biggest insider purchase was by President & CEO Rael Diamond for CA$1.5m worth of shares, at about CA$14.38 per share.
On top of the insider buying, it's good to see that Choice Properties Real Estate Investment Trust insiders have a valuable investment in the business. Indeed, they hold CA$24m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.2% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. The cherry on top is that the CEO, Rael Diamond is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations between CA$5.2b and CA$16b, like Choice Properties Real Estate Investment Trust, the median CEO pay is around CA$6.1m.
The Choice Properties Real Estate Investment Trust CEO received CA$3.5m in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Does Choice Properties Real Estate Investment Trust Deserve A Spot On Your Watchlist?
Choice Properties Real Estate Investment Trust's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Choice Properties Real Estate Investment Trust deserves timely attention. You should always think about risks though. Case in point, we've spotted 3 warning signs for Choice Properties Real Estate Investment Trust you should be aware of, and 1 of them is a bit unpleasant.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Choice Properties Real Estate Investment Trust, you'll probably love this free list of growing companies that insiders are 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.