Do Collins Property Group's (JSE:CPP) Earnings Warrant Your Attention?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Collins Property Group (JSE:CPP). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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How Fast Is Collins Property Group Growing Its Earnings Per Share?

In the last three years Collins Property Group's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Collins Property Group's EPS shot from R1.89 to R3.68, over the last year. It's not often a company can achieve year-on-year growth of 95%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While we note Collins Property Group achieved similar EBIT margins to last year, revenue grew by a solid 3.2% to R1.2b. That's encouraging news for the company!

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.

See our latest analysis for Collins Property Group

Since Collins Property Group is no giant, with a market capitalisation of R3.2b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Collins Property Group Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

While we did see insider selling of Collins Property Group stock in the last year, one single insider spent plenty more buying. Namely, Chairman Christoffel F. Wiese out-laid R8.5m for shares, at about R10.44 per share. It's hard to ignore news like that.

It's reassuring that Collins Property Group insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. To be specific, the CEO is paid modestly when compared to company peers of the same size. The median total compensation for CEOs of companies similar in size to Collins Property Group, with market caps between R1.8b and R7.2b, is around R14m.

The CEO of Collins Property Group was paid just R250k in total compensation for the year ending February 2024. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Collins Property Group To Your Watchlist?

Collins Property Group's earnings per share growth have been climbing higher at an appreciable rate. Not to mention the company's insiders have been adding to their portfolios and the CEO's remuneration policy looks to have had shareholders in mind seeing as it's quite modest for the company size. It could be that Collins Property Group is at an inflection point, given the EPS growth. For those attracted to fast growth, we'd suggest this stock merits monitoring. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Collins Property Group (at least 1 which makes us a bit uncomfortable) , and understanding these should be part of your investment process.

The good news is that Collins Property Group is not the only stock with insider buying. Here's a list of small cap, undervalued companies in ZA 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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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.