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 as Warren Buffett has mused, ‘If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.’ When they buy such story stocks, investors are all too often the patsy.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Ryman Hospitality Properties (NYSE:RHP). While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
Ryman Hospitality Properties’s Earnings Per Share Are 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. As a tree reaches steadily for the sky, Ryman Hospitality Properties’s EPS has grown 20% each year, compound, over three years. If the company can sustain that sort of growth, we’d expect shareholders to come away winners.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that Ryman Hospitality Properties’s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Ryman Hospitality Properties maintained stable EBIT margins over the last year, all while growing revenue 21% to US$1.5b. That’s progress.
The chart below shows how the company’s bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Ryman Hospitality Properties’s forecast profits?
Are Ryman Hospitality Properties Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.
Even though there was some insider selling over the last year, that was outweighed by Chairman & CEO Colin Reed’s huge outlay of US$2.1m, spent buying shares. The average price paid was about US$81.62. The quantum of that insider purchase is both rare and a sight to behold, not unlike an endangered Amur Leopard in the wild.
Along with the insider buying, another encouraging sign for Ryman Hospitality Properties is that insiders, as a group, have a considerable shareholding. With a whopping US$91m worth of shares as a group, insiders have plenty riding on the company’s success. That’s certainly enough to make me think that management will be very focussed on long term growth.
Should You Add Ryman Hospitality Properties To Your Watchlist?
For growth investors like me, Ryman Hospitality Properties’s raw rate of earnings growth is a beacon in the night. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it’s fair to say I think this stock may well deserve a spot on your watchlist. Of course, just because Ryman Hospitality Properties is growing does not mean it is undervalued. If you’re wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Ryman Hospitality Properties, you’ll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
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