Is Now The Time To Put St. Joe (NYSE:JOE) On Your Watchlist?
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 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.
So if you're like me, you might be more interested in profitable, growing companies, like St. Joe (NYSE:JOE). 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.
See our latest analysis for St. Joe
How Quickly Is St. Joe 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. Impressively, St. Joe has grown EPS by 35% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
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. St. Joe shareholders can take confidence from the fact that EBIT margins are up from 28% to 35%, and revenue is growing. That's great to see, on both counts.
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.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check St. Joe's balance sheet strength, before getting too excited.
Are St. Joe Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
We haven't seen any insiders selling St. Joe shares, in the last year. With that in mind, it's heartening that Jorge Gonzalez, the President of the company, paid US$42k for shares at around US$41.79 each.
Along with the insider buying, another encouraging sign for St. Joe is that insiders, as a group, have a considerable shareholding. Given insiders own a small fortune of shares, currently valued at US$99m, they have plenty of motivation to push the business to succeed. That's certainly enough to make me think that management will be very focussed on long term growth.
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. That's because on our analysis the CEO, Jorge Gonzalez, is paid less than the median for similar sized companies. I discovered that the median total compensation for the CEOs of companies like St. Joe with market caps between US$2.0b and US$6.4b is about US$5.7m.
The CEO of St. Joe only received US$1.4m in total compensation for the year ending . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. 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. It can also be a sign of good governance, more generally.
Does St. Joe Deserve A Spot On Your Watchlist?
For growth investors like me, St. Joe's raw rate of earnings growth is a beacon in the night. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So I do think this is one stock worth watching. Before you take the next step you should know about the 1 warning sign for St. Joe that we have uncovered.
As a growth investor I do like to see insider buying. But St. Joe 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.
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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.
