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Is Now The Time To Put Nexus Real Estate Investment Trust (CVE:NXR.UN) On Your Watchlist?

Simply Wall St

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 Nexus Real Estate Investment Trust (CVE:NXR.UN). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Nexus Real Estate Investment Trust

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

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that Nexus Real Estate Investment Trust has managed to grow EPS by 27% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. Nexus Real Estate Investment Trust maintained stable EBIT margins over the last year, all while growing revenue 7.7% to CA$57m. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

TSXV:NXR.UN Income Statement, January 16th 2020

Since Nexus Real Estate Investment Trust is no giant, with a market capitalization of CA$264m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Nexus Real Estate Investment Trust 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.

We note that Nexus Real Estate Investment Trust insiders spent CA$256k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Independent Chairman of the Board, Lorne Jacobson, who made the biggest single acquisition, paying CA$197k for shares at about CA$1.97 each.

I do like that insiders have been buying shares in Nexus Real Estate Investment Trust, but there is more evidence of shareholder friendly management. I refer to the very reasonable level of CEO pay. For companies with market capitalizations between CA$130m and CA$522m, like Nexus Real Estate Investment Trust, the median CEO pay is around CA$885k.

The Nexus Real Estate Investment Trust CEO received CA$612k in compensation for the year ending December 2018. That seems pretty reasonable, especially given its below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Nexus Real Estate Investment Trust To Your Watchlist?

You can't deny that Nexus Real Estate Investment Trust has grown its earnings per share at a very impressive rate. That's attractive. And that's not the only positive, either. We have both insider buying and reasonable and remuneration to consider. The message I'd take from this quick rundown is that, yes, this stock is worth investigating further. Of course, just because Nexus Real Estate Investment Trust is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

As a growth investor I do like to see insider buying. But Nexus 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

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.