Here's Why I Think Essential Properties Realty Trust (NYSE:EPRT) Might Deserve Your Attention Today
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. 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 contrast to all that, I prefer to spend time on companies like Essential Properties Realty Trust (NYSE:EPRT), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
View our latest analysis for Essential Properties Realty Trust
Essential Properties Realty Trust's Earnings Per Share Are Growing.
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Who among us would not applaud Essential Properties Realty Trust's stratospheric annual EPS growth of 43%, 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. I note that Essential Properties Realty Trust's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. The good news is that Essential Properties Realty Trust is growing revenues, and EBIT margins improved by 11.0 percentage points to 57%, over the last year. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of Essential Properties 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 Essential Properties Realty 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. 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.
The good news for Essential Properties Realty Trust shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Timothy Earnshaw, the Senior VP & Chief Accounting Officer of the company, paid US$9.9k for shares at around US$22.50 each.
The good news, alongside the insider buying, for Essential Properties Realty Trust bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$23m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.7% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. That's because on our analysis the CEO, Pete Mavoides, is paid less than the median for similar sized companies. For companies with market capitalizations between US$2.0b and US$6.4b, like Essential Properties Realty Trust, the median CEO pay is around US$5.2m.
Essential Properties Realty Trust offered total compensation worth US$2.8m to its CEO in the year to . 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 Essential Properties Realty Trust To Your Watchlist?
Essential Properties Realty Trust's earnings have taken off like any random crypto-currency did, back in 2017. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Essential Properties Realty Trust deserves timely attention. Still, you should learn about the 3 warning signs we've spotted with Essential Properties Realty Trust (including 1 which shouldn't be ignored) .
The good news is that Essential Properties Realty Trust is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
