With EPS Growth And More, Medical Properties Trust (NYSE:MPW) Is Interesting
Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Medical Properties Trust (NYSE:MPW). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.
View our latest analysis for Medical Properties Trust
Medical Properties Trust's Earnings Per Share Are Growing.
As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Medical Properties Trust managed to grow EPS by 4.0% per year, over three years. While that sort of growth rate isn't amazing, it does show the business is growing.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Not all of Medical Properties 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. While we note Medical Properties Trust's EBIT margins were flat over the last year, revenue grew by a solid 52% to US$1.2b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of Medical Properties 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 Medical Properties Trust Insiders Aligned With All Shareholders?
Since Medical Properties Trust has a market capitalization of US$9.1b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth US$110m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.
Does Medical Properties Trust Deserve A Spot On Your Watchlist?
As I already mentioned, Medical Properties Trust is a growing business, which is what I like to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Medical Properties Trust (1 makes us a bit uncomfortable) you should be aware of.
Although Medical Properties 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.
This article by Simply Wall St is general in nature. 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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