Does Sun Communities (NYSE:SUI) Deserve A Spot On Your Watchlist?

By
Simply Wall St
Published
April 14, 2022
NYSE:SUI
Source: Shutterstock

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Sun Communities (NYSE:SUI). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Sun Communities

How Fast Is Sun Communities 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). It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, Sun Communities has grown EPS by 35% per year, compound, in the last three years. As a result, we can understand why the stock trades on a high multiple of trailing twelve month earnings.

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 Sun Communities'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. Sun Communities maintained stable EBIT margins over the last year, all while growing revenue 62% to US$2.2b. That's a real positive.

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.

earnings-and-revenue-history
NYSE:SUI Earnings and Revenue History April 14th 2022

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 Sun Communities?

Are Sun Communities Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. 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 Gary Shiffman's huge outlay of US$71m, spent buying shares. The average price paid was about US$195. Big purchases like that are well worth noting, especially for those who like to follow the insider money.

Along with the insider buying, another encouraging sign for Sun Communities is that insiders, as a group, have a considerable shareholding. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$325m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Does Sun Communities Deserve A Spot On Your Watchlist?

For growth investors like me, Sun Communities's raw rate of earnings growth is a beacon in the night. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So I do think this is one stock worth watching. What about risks? Every company has them, and we've spotted 4 warning signs for Sun Communities (of which 1 makes us a bit uncomfortable!) you should know about.

The good news is that Sun Communities 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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