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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. And in . found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
In contrast to all that, I prefer to spend time on companies like Essex Property Trust (NYSE:ESS), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.
Essex Property Trust's Earnings Per Share Are Growing.
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that Essex Property Trust has managed to grow EPS by 19% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that, last year, Essex Property Trust's revenue from operations was lower than its revenue, so that could distort my analysis of its margins. It seems Essex Property Trust is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not bad, but it doesn't point to ongoing future growth, either.
In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Essex Property Trust.
Are Essex Property Trust Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$19b company like Essex Property Trust. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$346m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!
It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like Essex Property Trust, with market caps over US$8.0b, is about US$11m.
The CEO of Essex Property Trust only received US$5.4m in total compensation for the year ending December 2018. That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. 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 a culture of integrity, in a broader sense.
Should You Add Essex Property Trust To Your Watchlist?
You can't deny that Essex Property Trust has grown its earnings per share at a very impressive rate. That's attractive. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. This may only be a fast rundown, but the takeaway for me is that Essex Property Trust is worth keeping an eye on. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of Essex Property Trust. You might benefit from giving it a glance today.
Although Essex Property Trust certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
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