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 completely lacks a track record of revenue and profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in True North Commercial Real Estate Investment Trust (TSE:TNT.UN). While profit is not necessarily a social good, it’s easy to admire a business than can consistently produce it. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
True North Commercial Real Estate Investment Trust’s Earnings Per Share Are Growing.
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud True North Commercial Real Estate Investment Trust’s stratospheric annual EPS growth of 56%, compound, over the last three years? While that sort of growth rate isn’t sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.
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. True North Commercial Real Estate Investment Trust maintained stable EBIT margins over the last year, all while growing revenue 30% to CA$102m. That’s progress.
You can take a look at the company’s revenue and earnings growth trend, in the chart below. 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 True North Commercial Real Estate Investment Trust’s balance sheet strength, before getting too excited.
Are True North Commercial Real Estate Investment Trust Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.
We do note that, in the last year, insiders sold -CA$182.2k worth of shares. But that’s far less than the CA$5.0m insiders spend purchasing stock. This makes me even more interested in True North Commercial Real Estate Investment Trust because it suggests that those who understand the company best, are optimistic. We also note that it was the President, Daniel Drimmer, who made the biggest single acquisition, paying CA$3.5m for shares at about CA$6.92 each.
Along with the insider buying, another encouraging sign for True North Commercial Real Estate Investment Trust is that insiders, as a group, have a considerable shareholding. Indeed, they hold CA$42m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 6.6% of the company, demonstrating a degree of high-level alignment with shareholders.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Daniel Drimmer is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like True North Commercial Real Estate Investment Trust with market caps between CA$264m and CA$1.1b is about CA$1.5m.
The CEO of True North Commercial Real Estate Investment Trust was paid just CA$20k in total compensation for the year ending December 2018. You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I’d also argue reasonable pay levels attest to good decision making more generally.
Does True North Commercial Real Estate Investment Trust Deserve A Spot On Your Watchlist?
True North Commercial 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. Because of the potential that it has reached an inflection point, I’d suggest True North Commercial Real Estate Investment Trust belongs on the top of your watchlist. Now, you could try to make up your mind on True North Commercial Real Estate Investment Trust by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of True North Commercial 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
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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