Is Now The Time To Put Phillips Edison (NASDAQ:PECO) On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

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 Phillips Edison (NASDAQ:PECO). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Phillips Edison with the means to add long-term value to shareholders.

Check out our latest analysis for Phillips Edison

How Fast Is Phillips Edison Growing Its Earnings Per Share?

Over the last three years, Phillips Edison 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. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, Phillips Edison's EPS catapulted from US$0.093 to US$0.25, over the last year. It's not often a company can achieve year-on-year growth of 170%.

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. It's noted that Phillips Edison's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The music to the ears of Phillips Edison shareholders is that EBIT margins have grown from 18% to 21% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Fortunately, we've got access to analyst forecasts of Phillips Edison's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Phillips Edison Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own Phillips Edison shares worth a considerable sum. To be specific, they have US$14m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.4% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Phillips Edison To Your Watchlist?

Phillips Edison's earnings have taken off in quite an impressive fashion. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Phillips Edison for a spot on your watchlist. However, before you get too excited we've discovered 3 warning signs for Phillips Edison (1 is significant!) that you should be aware of.

Although Phillips Edison certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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. 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.