Here's Why Digital Realty Trust (NYSE:DLR) Has Caught The Eye Of Investors

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.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Digital Realty Trust (NYSE:DLR). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Digital Realty Trust

How Fast Is Digital Realty Trust Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Digital Realty Trust's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 57%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. Digital Realty Trust maintained stable EBIT margins over the last year, all while growing revenue 9.1% to US$4.5b. That's encouraging news for the company!

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

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 Digital Realty Trust's future EPS 100% free.

Are Digital Realty Trust Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$37b company like Digital Realty Trust. But we are reassured by the fact they have invested in the company. As a matter of fact, their holding is valued at US$41m. This considerable investment should help drive long-term value in the business. Despite being just 0.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add Digital Realty Trust To Your Watchlist?

Digital Realty Trust's earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Digital Realty Trust very closely. Still, you should learn about the 3 warning signs we've spotted with Digital Realty Trust (including 1 which makes us a bit uncomfortable).

Although Digital Realty Trust 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.