Does Arbor Realty Trust (NYSE:ABR) Deserve A Spot On Your Watchlist?
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.
In contrast to all that, I prefer to spend time on companies like Arbor Realty Trust (NYSE:ABR), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
View our latest analysis for Arbor Realty Trust
How Fast Is Arbor Realty Trust Growing?
As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Arbor Realty Trust grew its EPS by 5.3% per year. While that sort of growth rate isn't amazing, it does show the business is growing.
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. Not all of Arbor Realty Trust'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. Arbor Realty Trust maintained stable EBIT margins over the last year, all while growing revenue 55% to US$661m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of Arbor Realty Trust's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Arbor Realty Trust Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, 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.
Arbor Realty Trust top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the Lead Independent Director, William Green, paid US$162k to buy shares at an average price of US$17.81.
Along with the insider buying, another encouraging sign for Arbor Realty Trust is that insiders, as a group, have a considerable shareholding. Given insiders own a small fortune of shares, currently valued at US$61m, they have plenty of motivation to push the business to succeed. That's certainly enough to make me think that management will be very focussed on long term growth.
Is Arbor Realty Trust Worth Keeping An Eye On?
As I already mentioned, Arbor Realty Trust is a growing business, which is what I like to see. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. We don't want to rain on the parade too much, but we did also find 3 warning signs for Arbor Realty Trust (1 can't be ignored!) that you need to be mindful of.
As a growth investor I do like to see insider buying. But Arbor Realty Trust isn't the only one. You can see a a free list of them here.
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.
