If You Like EPS Growth Then Check Out Polygon Real Estate (TLV:POLY) Before It's Too Late

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Polygon Real Estate (TLV:POLY). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Polygon Real Estate

How Fast Is Polygon Real Estate Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. You can imagine, then, that it almost knocked my socks off when I realized that Polygon Real Estate grew its EPS from ₪0.0044 to ₪1.62, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company.

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. While Polygon Real Estate did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future my hold further growth, especially if EBIT margins can stabilize.

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.

Since Polygon Real Estate is no giant, with a market capitalization of ₪136m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Polygon Real Estate Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Polygon Real Estate insiders own a meaningful share of the business. Indeed, with a collective holding of 52%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have ₪71m invested in the business, using the current share price. That's nothing to sneeze at!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I'd say they are indeed. For companies with market capitalizations under ₪662m, like Polygon Real Estate, the median CEO pay is around ₪1.4m.

The CEO of Polygon Real Estate only received ₪293k in total compensation for the year ending . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Is Polygon Real Estate Worth Keeping An Eye On?

Polygon Real Estate's earnings have taken off like any random crypto-currency did, back in 2017. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The sharp increase in earnings could signal good business momentum. Polygon Real Estate certainly ticks a few of my boxes, so I think it's probably well worth further consideration. Before you take the next step you should know about the 2 warning signs for Polygon Real Estate (1 shouldn't be ignored!) that we have uncovered.

Although Polygon Real Estate 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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This article by Simply Wall St is general in nature. 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.
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