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. 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 Allreal Holding (VTX:ALLN). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.
How Quickly Is Allreal Holding Increasing Earnings Per Share?
As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Allreal Holding grew its EPS by 11% per year. That growth rate is fairly good, assuming the company can keep it up.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Allreal Holding's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Unfortunately, Allreal Holding's revenue dropped 7.1% last year, but the silver lining is that EBIT margins improved from 32% to 36%. That falls short of ideal.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Allreal Holding?
Are Allreal Holding 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 Allreal Holding insiders have a significant amount of capital invested in the stock. With a whopping CHF52m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.
It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like Allreal Holding with market caps between CHF1.8b and CHF5.7b is about CHF1.5m.
Allreal Holding offered total compensation worth CHF1.2m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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. It can also be a sign of a culture of integrity, in a broader sense.
Should You Add Allreal Holding To Your Watchlist?
One positive for Allreal Holding is that it is growing EPS. That's nice to see. The fact that EPS is growing is a genuine positive for Allreal Holding, 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. However, before you get too excited we've discovered 3 warning signs for Allreal Holding (2 are potentially serious!) that you should be aware of.
Although Allreal Holding certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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