With EPS Growth And More, Apollo Commercial Real Estate Finance (NYSE:ARI) Makes An Interesting Case

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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Apollo Commercial Real Estate Finance

How Fast Is Apollo Commercial Real Estate Finance Growing Its Earnings Per Share?

Over the last three years, Apollo Commercial Real Estate Finance has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Apollo Commercial Real Estate Finance's EPS shot from US$1.17 to US$2.00, over the last year. Year on year growth of 71% is certainly a sight to behold.

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. Our analysis has highlighted that Apollo Commercial Real Estate Finance's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Apollo Commercial Real Estate Finance achieved similar EBIT margins to last year, revenue grew by a solid 23% to US$358m. That's progress.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Apollo Commercial Real Estate Finance's future EPS 100% free.

Are Apollo Commercial Real Estate Finance 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. 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.

While Apollo Commercial Real Estate Finance insiders did net US$11k selling stock over the last year, they invested US$406k, a much higher figure. You could argue that level of buying implies genuine confidence in the business. We also note that it was the Independent Director, Robert Kasdin, who made the biggest single acquisition, paying US$239k for shares at about US$9.54 each.

It's reassuring that Apollo Commercial Real Estate Finance insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Specifically, the CEO is paid quite reasonably for a company of this size. The median total compensation for CEOs of companies similar in size to Apollo Commercial Real Estate Finance, with market caps between US$1.0b and US$3.2b, is around US$5.1m.

Apollo Commercial Real Estate Finance's CEO took home a total compensation package of US$2.2m in the year prior to December 2022. 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.

Does Apollo Commercial Real Estate Finance Deserve A Spot On Your Watchlist?

Apollo Commercial Real Estate Finance's earnings have taken off in quite an impressive fashion. Better yet, we can observe insider buying and the chief executive pay looks reasonable. It could be that Apollo Commercial Real Estate Finance is at an inflection point, given the EPS growth. For those attracted to fast growth, we'd suggest this stock merits monitoring. We don't want to rain on the parade too much, but we did also find 3 warning signs for Apollo Commercial Real Estate Finance (2 are a bit unpleasant!) that you need to be mindful of.

Keen growth investors love to see insider buying. Thankfully, Apollo Commercial Real Estate Finance isn't the only one. You can see a a free list of them here.

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.