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Here's Why I Think Canadian Net Real Estate Investment Trust (CVE:NET.UN) Might Deserve Your Attention Today

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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 their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like Canadian Net Real Estate Investment Trust (CVE:NET.UN). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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 Canadian Net Real Estate Investment Trust

How Quickly Is Canadian Net Real Estate Investment Trust Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. As a tree reaches steadily for the sky, Canadian Net Real Estate Investment Trust's EPS has grown 25% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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 Canadian Net Real Estate Investment 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 Canadian Net Real Estate Investment Trust's EBIT margins were flat over the last year, revenue grew by a solid 53% to CA$21m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

earnings-and-revenue-history
earnings-and-revenue-history

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Canadian Net Real Estate Investment Trust's future profits.

Are Canadian Net Real Estate Investment Trust Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Any way you look at it Canadian Net Real Estate Investment Trust shareholders can gain quiet confidence from the fact that insiders shelled out CA$500k to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to brim with joyful expectancy. Zooming in, we can see that the biggest insider purchase was by Independent Trustee Michael Zakuta for CA$127k worth of shares, at about CA$7.45 per share.

On top of the insider buying, it's good to see that Canadian Net Real Estate Investment Trust insiders have a valuable investment in the business. To be specific, they have CA$22m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 13% of the company; visible skin in the game.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Jason Parravano is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations under CA$253m, like Canadian Net Real Estate Investment Trust, the median CEO pay is around CA$210k.

The Canadian Net Real Estate Investment Trust CEO received CA$161k in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.

Should You Add Canadian Net Real Estate Investment Trust To Your Watchlist?

You can't deny that Canadian Net Real Estate Investment Trust has grown its earnings per share at a very impressive rate. That's attractive. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So I do think this is one stock worth watching. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Canadian Net Real Estate Investment Trust (at least 1 which is potentially serious) , and understanding these should be part of your investment process.

As a growth investor I do like to see insider buying. But Canadian Net Real Estate Investment 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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.