Do Community Healthcare Trust's (NYSE:CHCT) Earnings Warrant Your Attention?

By
Simply Wall St
Published
January 12, 2021
NYSE:CHCT

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like Community Healthcare Trust (NYSE:CHCT), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

View our latest analysis for Community Healthcare Trust

How Quickly Is Community Healthcare Trust Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. I, for one, am blown away by the fact that Community Healthcare Trust has grown EPS by 56% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of Community Healthcare Trust's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Community Healthcare Trust shareholders can take confidence from the fact that EBIT margins are up from 28% to 37%, and revenue is growing. That's great to see, on both counts.

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

earnings-and-revenue-history
NYSE:CHCT Earnings and Revenue History January 12th 2021

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Community Healthcare Trust's forecast profits?

Are Community Healthcare Trust 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.

We note that Community Healthcare Trust insiders spent US$197k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. It is also worth noting that it was Independent Director Robert Hensley who made the biggest single purchase, worth US$100k, paying US$38.02 per share.

On top of the insider buying, it's good to see that Community Healthcare Trust insiders have a valuable investment in the business. With a whopping US$65m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

Does Community Healthcare Trust Deserve A Spot On Your Watchlist?

Community Healthcare Trust's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. What's more insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Community Healthcare Trust deserves timely attention. What about risks? Every company has them, and we've spotted 3 warning signs for Community Healthcare Trust you should know about.

The good news is that Community Healthcare Trust 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. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


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