Here's Why Cairn Homes (LON:CRN) Has Caught The Eye Of Investors

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Cairn Homes (LON:CRN). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Cairn Homes

How Quickly Is Cairn Homes Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Recognition must be given to the that Cairn Homes has grown EPS by 37% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. EBIT margins for Cairn Homes remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 12% to €597m. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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 Cairn Homes.

Are Cairn Homes Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Cairn Homes top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the Co-Founder, Michael Stanley, paid €91k to buy shares at an average price of €0.89. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

On top of the insider buying, it's good to see that Cairn Homes insiders have a valuable investment in the business. Holding €59m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. Amounting to 8.1% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.

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, Michael Stanley is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalisations between €365m and €1.5b, like Cairn Homes, the median CEO pay is around €1.3m.

Cairn Homes offered total compensation worth €1.1m to its CEO in the year to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is Cairn Homes Worth Keeping An Eye On?

Cairn Homes' earnings per share growth have been climbing higher at an appreciable rate. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Cairn Homes deserves timely attention. We don't want to rain on the parade too much, but we did also find 1 warning sign for Cairn Homes that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Cairn Homes, you'll probably love this curated collection of companies in GB that have witnessed growth alongside 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.