U.S. markets closed
  • S&P 500

    4,577.11
    -85.74 (-1.84%)
     
  • Dow 30

    35,368.47
    -543.34 (-1.51%)
     
  • Nasdaq

    14,506.90
    -386.86 (-2.60%)
     
  • Russell 2000

    2,096.23
    -66.23 (-3.06%)
     
  • Crude Oil

    86.60
    +2.78 (+3.32%)
     
  • Gold

    1,813.20
    -3.30 (-0.18%)
     
  • Silver

    23.51
    +0.60 (+2.60%)
     
  • EUR/USD

    1.1331
    -0.0079 (-0.69%)
     
  • 10-Yr Bond

    1.8650
    +0.0930 (+5.25%)
     
  • GBP/USD

    1.3599
    -0.0048 (-0.35%)
     
  • USD/JPY

    114.5850
    +0.0050 (+0.00%)
     
  • BTC-USD

    42,371.12
    +614.76 (+1.47%)
     
  • CMC Crypto 200

    1,009.15
    -0.24 (-0.02%)
     
  • FTSE 100

    7,563.55
    -47.68 (-0.63%)
     
  • Nikkei 225

    28,257.25
    -76.27 (-0.27%)
     

Here's Why We Think Sun Communities (NYSE:SUI) Is Well Worth Watching

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Sun Communities (NYSE:SUI). 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. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Sun Communities

How Fast Is Sun Communities Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Sun Communities has managed to grow EPS by 21% per year over three years. So it's not surprising to see the company trades on a very high multiple of (past) earnings.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that Sun Communities's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. On the one hand, Sun Communities's EBIT margins fell over the last year, but on the other hand, revenue grew. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

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.

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

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Sun Communities EPS 100% free.

Are Sun Communities Insiders Aligned With All Shareholders?

Since Sun Communities has a market capitalization of US$21b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$382m. 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.

Is Sun Communities Worth Keeping An Eye On?

For growth investors like me, Sun Communities's raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. We don't want to rain on the parade too much, but we did also find 3 warning signs for Sun Communities (1 shouldn't be ignored!) that you need to be mindful of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.

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.

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