Stock Analysis

    Does Healthcare Realty Trust (NYSE:HR) Deserve A Spot On Your Watchlist?

      •  Updated
    Source: Shutterstock

    It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.

    If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Healthcare Realty Trust (NYSE:HR). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

    Check out our latest analysis for Healthcare Realty Trust

    How Quickly Is Healthcare Realty Trust Increasing Earnings Per Share?

    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). It's no surprise, then, that I like to invest in companies with EPS growth. Who among us would not applaud Healthcare Realty Trust's stratospheric annual EPS growth of 53%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

    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. While we note Healthcare Realty Trust's EBIT margins were flat over the last year, revenue grew by a solid 4.6% to US$504m. That's a real positive.

    In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

    earnings-and-revenue-history
    NYSE:HR Earnings and Revenue History June 2nd 2021

    The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Healthcare Realty Trust EPS 100% free.

    Are Healthcare Realty Trust Insiders Aligned With All Shareholders?

    It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Healthcare Realty Trust insiders have a significant amount of capital invested in the stock. Indeed, they hold US$41m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.9% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

    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 Healthcare Realty Trust with market caps between US$2.0b and US$6.4b is about US$5.3m.

    The Healthcare Realty Trust CEO received US$2.8m in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

    Is Healthcare Realty Trust Worth Keeping An Eye On?

    Healthcare Realty Trust's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The strong EPS improvement suggests the businesses is humming along. Big growth can make big winners, so I do think Healthcare Realty Trust is worth considering carefully. Don't forget that there may still be risks. For instance, we've identified 5 warning signs for Healthcare Realty Trust (2 shouldn't be ignored) you should be aware of.

    Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

    Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

    If you’re looking to trade Healthcare Realty Trust, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


    Valuation is complex, but we're helping make it simple.

    Find out whether is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

    View the Free Analysis