Stock Analysis

Here's Why British Land (LON:BLND) Has Caught The Eye Of Investors

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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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like British Land (LON:BLND). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide British Land with the means to add long-term value to shareholders.

View our latest analysis for British Land

British Land's Improving Profits

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. Which is why EPS growth is looked upon so favourably. It's an outstanding feat for British Land to have grown EPS from UK£0.074 to UK£0.60 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It's noted that British Land's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The good news is that British Land is growing revenues, and EBIT margins improved by 14.6 percentage points to 65%, 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. Click on the chart to see the exact numbers.

LSE:BLND Earnings and Revenue History March 15th 2023

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 British Land.

Are British Land 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We note that British Land insiders spent UK£106k on stock, over the last year; in contrast, we didn't see any selling. This is a good look for the company as it paints an optimistic picture for the future. We also note that it was the Independent Non-Executive Chairman of the Board, Tim Score, who made the biggest single acquisition, paying UK£25k for shares at about UK£4.50 each.

It's reassuring that British Land insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. To be specific, the CEO is paid modestly when compared to company peers of the same size. For companies with market capitalisations between UK£1.6b and UK£5.3b, like British Land, the median CEO pay is around UK£2.2m.

British Land offered total compensation worth UK£1.9m to its CEO in the year to March 2022. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, 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.

Should You Add British Land To Your Watchlist?

British Land's earnings per share growth have been climbing higher at an appreciable rate. The company can also boast of insider buying, and reasonable remuneration for the CEO. It could be that British Land is at an inflection point, given the EPS growth. For those attracted to fast growth, we'd suggest this stock merits monitoring. Even so, be aware that British Land is showing 1 warning sign in our investment analysis , you should know about...

There are plenty of other companies that have insiders buying up shares. So if you like the sound of British Land, 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.

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