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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. 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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Crown Castle International (REIT) (NYSE:CCI). 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. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Fast Is Crown Castle International (REIT) Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Who among us would not applaud Crown Castle International (REIT)'s stratospheric annual EPS growth of 39%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.
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. Not all of Crown Castle International (REIT)'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. The good news is that Crown Castle International (REIT) is growing revenues, and EBIT margins improved by 2.5 percentage points to 30%, over the last year. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Crown Castle International (REIT)?
Are Crown Castle International (REIT) Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
While Crown Castle International (REIT) insiders did net -US$5.4m selling stock over the last year, they invested US$5.8m, a much higher figure. You could argue that level of buying implies genuine confidence in the business. It is also worth noting that it was Independent Chairman of the Board J. Martin who made the biggest single purchase, worth US$2.1m, paying US$192 per share.
The good news, alongside the insider buying, for Crown Castle International (REIT) bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$413m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!
Should You Add Crown Castle International (REIT) To Your Watchlist?
Crown Castle International (REIT)'s earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. What's more insiders own a significant stake in the company and have been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest Crown Castle International (REIT) belongs on the top of your watchlist. Still, you should learn about the 4 warning signs we've spotted with Crown Castle International (REIT) (including 1 which shouldn't be ignored) .
As a growth investor I do like to see insider buying. But Crown Castle International (REIT) 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.
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.
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