Here's Why Apollo Commercial Real Estate Finance (NYSE:ARI) Has Caught The Eye Of Investors

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 Apollo Commercial Real Estate Finance (NYSE:ARI). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Apollo Commercial Real Estate Finance

Apollo Commercial Real Estate Finance's Earnings Per Share Are Growing

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. We can see that in the last three years Apollo Commercial Real Estate Finance grew its EPS by 7.6% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

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. Not all of Apollo Commercial Real Estate Finance's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Apollo Commercial Real Estate Finance reported flat revenue and EBIT margins over the last year. That's not a major concern but nor does it point to the long term growth we like to see.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Apollo Commercial Real Estate Finance's future profits.

Are Apollo Commercial Real Estate Finance 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. 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.

In twelve months, insiders sold US$137k worth of Apollo Commercial Real Estate Finance shares. On the other hand, President Stuart Rothstein paid US$168k for shares, at a price of about US$11.18 per share. And that's a reason to be optimistic.

Recent insider purchases of Apollo Commercial Real Estate Finance stock is not the only way management has kept the interests of the general public shareholders in mind. Namely, Apollo Commercial Real Estate Finance has a very reasonable level of CEO pay. Our analysis has discovered that the median total compensation for the CEOs of companies like Apollo Commercial Real Estate Finance with market caps between US$1.0b and US$3.2b is about US$5.4m.

Apollo Commercial Real Estate Finance's CEO took home a total compensation package of US$2.2m in the year prior to December 2021. First impressions seem to indicate a compensation policy that is favourable to shareholders. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Apollo Commercial Real Estate Finance To Your Watchlist?

One important encouraging feature of Apollo Commercial Real Estate Finance is that it is growing profits. And that's not all. We've also seen insiders buying stock, and noted modest executive pay. If these factors aren't enough to secure Apollo Commercial Real Estate Finance a spot on the watchlist, then it certainly warrants a closer look at the very least. Still, you should learn about the 3 warning signs we've spotted with Apollo Commercial Real Estate Finance (including 2 which are a bit unpleasant).

The good news is that Apollo Commercial Real Estate Finance is not the only growth stock with insider buying. Here's a list of them... with 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.