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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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.
So if you’re like me, you might be more interested in profitable, growing companies, like Essex Property Trust (NYSE:ESS). While profit is not necessarily a social good, it’s easy to admire a business than can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Fast Is Essex Property Trust 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). That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Essex Property Trust has managed to grow EPS by 19% per year over three years. As a general rule, we’d say that if a company can keep up that sort of growth, shareholders will be smiling.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of Essex Property Trust’s revenue last year was 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. It seems Essex Property Trust is pretty stable, since revenue and EBIT margins are pretty flat year on 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. For finer detail, click on the image.
While we live in the present moment at all times, there’s no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Essex Property Trust?
Are Essex Property Trust Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$19b company like Essex Property Trust. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth US$346m. This suggests to me that leadership will be very mindful of shareholders’ interests when making decisions!
It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like Essex Property Trust, with market caps over US$8.0b, is about US$11m.
The CEO of Essex Property Trust only received US$5.4m in total compensation for the year ending December 2018. That looks like modest pay to me, and may hint at a certain respect for the interests of 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. I’d also argue reasonable pay levels attest to good decision making more generally.
Should You Add Essex Property Trust To Your Watchlist?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Essex Property Trust’s strong EPS growth. If that’s not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Each to their own, but I think all this makes Essex Property Trust look rather interesting indeed. Once you’ve identified a business you like, the next step is to consider what you think it’s worth. And right now is your chance to view our exclusive discounted cashflow valuation of Essex Property Trust. You might benefit from giving it a glance today.
Although Essex Property Trust certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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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