If EPS Growth Is Important To You, Collins Property Group (JSE:CPP) Presents An Opportunity

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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable 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.

View our latest analysis for Collins Property Group

Collins Property Group's Improving Profits

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. Impressively, Collins Property Group's EPS catapulted from R1.89 to R3.68, over the last year. It's not often a company can achieve year-on-year growth of 95%.

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 Collins Property Group achieved similar EBIT margins to last year, revenue grew by a solid 3.2% 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.

Since Collins Property Group is no giant, with a market capitalisation of R3.9b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Collins Property Group Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

While Collins Property Group insiders did net R627k selling stock over the last year, they invested R9.0m, a much higher figure. An optimistic sign for those with Collins Property Group in their watchlist. We also note that it was the Chairman, Christoffel F. Wiese, who made the biggest single acquisition, paying R8.2m for shares at about R10.42 each.

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. 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 R1.9b and R7.4b, is around R13m.

The Collins Property Group CEO received total compensation of only R250k in the year to 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 compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

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. If these have piqued your interest, then this stock surely warrants a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 5 warning signs for Collins Property Group (2 are significant!) that you need to be mindful of.

Keen growth investors love to see insider activity. Thankfully, Collins Property Group isn't the only one. You can see a a curated list of South African companies which have exhibited consistent growth accompanied by high insider ownership.

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.