With EPS Growth And More, Tricon Residential (TSE:TCN) Makes An Interesting Case

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Tricon Residential (TSE:TCN), 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 Tricon Residential with the means to add long-term value to shareholders.

Check out our latest analysis for Tricon Residential

Tricon Residential's Improving Profits

In the last three years Tricon Residential's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Tricon Residential's EPS shot up from US$2.07 to US$2.84; a result that's bound to keep shareholders happy. That's a commendable gain of 37%.

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. It's noted that Tricon Residential's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The music to the ears of Tricon Residential shareholders is that EBIT margins have grown from 38% to 50% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Tricon Residential's future EPS 100% free.

Are Tricon Residential Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. 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 US$230k) this was overshadowed by a mountain of buying, totalling US$1.7m in just one year. This adds to the interest in Tricon Residential because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was Co-Founder & Non Independent Director Geoffrey Matus who made the biggest single purchase, worth CA$575k, paying CA$11.50 per share.

On top of the insider buying, it's good to see that Tricon Residential insiders have a valuable investment in the business. Given insiders own a significant chunk of shares, currently valued at US$89m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

Does Tricon Residential Deserve A Spot On Your Watchlist?

For growth investors, Tricon Residential's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. These things considered, this is one stock worth watching. It is worth noting though that we have found 4 warning signs for Tricon Residential (2 are concerning!) that you need to take into consideration.

The good news is that Tricon Residential is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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.