Here's Why We Think Collins Property Group (JSE:CPP) Is Well Worth Watching

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. 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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Collins Property Group (JSE:CPP). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Collins Property Group

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. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, Collins Property Group's EPS shot from R1.30 to R3.47, over the last year. It's not often a company can achieve year-on-year growth of 168%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Collins Property Group maintained stable EBIT margins over the last year, all while growing revenue 2.9% to R1.2b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Collins Property Group isn't a huge company, given its market capitalisation of R3.1b. That makes it extra important to check on its balance sheet strength.

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. 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.

We note that Collins Property Group insiders spent R1.4m on stock, over the last year; in contrast, we didn't see any selling. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. It is also worth noting that it was Chairman Christoffel F. Wiese who made the biggest single purchase, worth R655k, paying R6.55 per share.

Recent insider purchases of Collins Property Group stock is not the only way management has kept the interests of the general public shareholders in mind. Specifically, the CEO is paid quite reasonably for a company of this size. The median total compensation for CEOs of companies similar in size to Collins Property Group, with market caps between R1.7b and R7.0b, is around R13m.

The Collins Property Group CEO received total compensation of only R250k in the year to February 2024. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. 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. It can also be a sign of good governance, more generally.

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. The strong EPS growth suggests Collins Property Group may be at an inflection point. If these have piqued your interest, then this stock surely warrants a spot on your watchlist. Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Collins Property Group (1 shouldn't be ignored) you should be aware of.

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.