Should You Be Adding Dream Office Real Estate Investment Trust (TSE:D.UN) To Your Watchlist Today?

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Dream Office Real Estate Investment Trust (TSE:D.UN). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Dream Office Real Estate Investment Trust

How Quickly Is Dream Office Real Estate Investment Trust Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. We can see that in the last three years Dream Office Real Estate Investment Trust grew its EPS by 15% per year. That's a good rate of growth, if it can be sustained. It's also worth noting that the EPS growth has been assisted by share buybacks, indicating the company is in a position to return capital to shareholders.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. I note that Dream Office 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. The good news is that Dream Office Real Estate Investment Trust is growing revenues, and EBIT margins improved by 8.7 percentage points to 69%, over the last year. That's great to see, on both counts.

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.

Fortunately, we've got access to analyst forecasts of Dream Office Real Estate Investment Trust's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Dream Office Real Estate Investment Trust Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Dream Office Real Estate Investment Trust insiders have a significant amount of capital invested in the stock. To be specific, they have CA$17m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 1.3% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like Dream Office Real Estate Investment Trust with market caps between CA$515m and CA$2.1b is about CA$1.9m.

Dream Office Real Estate Investment Trust offered total compensation worth CA$1.3m to its CEO in the year to . 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 good governance, more generally.

Does Dream Office Real Estate Investment Trust Deserve A Spot On Your Watchlist?

One important encouraging feature of Dream Office Real Estate Investment Trust is that it is growing profits. The fact that EPS is growing is a genuine positive for Dream Office Real Estate Investment Trust, but the pretty picture gets better than that. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. What about risks? Every company has them, and we've spotted 3 warning signs for Dream Office Real Estate Investment Trust (of which 1 is a bit concerning!) you should know about.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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.