Should You Be Adding Sirius Real Estate (LON:SRE) 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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Sirius Real Estate (LON:SRE). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.

See our latest analysis for Sirius Real Estate

Sirius Real Estate's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Sirius Real Estate grew its EPS by 9.2% per year. That growth rate is fairly good, assuming the company can keep it up.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. I note that Sirius Real Estate's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Sirius Real Estate maintained stable EBIT margins over the last year, all while growing revenue 12% to €180m. That's progress.

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 Sirius Real Estate?

Are Sirius Real Estate Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

While Sirius Real Estate insiders did net -€3.5m selling stock over the last year, they invested €4.0m, a much higher figure. You could argue that level of buying implies genuine confidence in the business. We also note that it was the CEO & Executive Director, Andrew Coombs, who made the biggest single acquisition, paying UK£2.7m for shares at about UK£0.90 each.

Along with the insider buying, another encouraging sign for Sirius Real Estate is that insiders, as a group, have a considerable shareholding. To be specific, they have €28m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 1.7% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Sirius Real Estate Worth Keeping An Eye On?

One positive for Sirius Real Estate is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. However, before you get too excited we've discovered 4 warning signs for Sirius Real Estate (1 can't be ignored!) that you should be aware of.

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