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Do SL Green Realty's (NYSE:SLG) Earnings Warrant Your Attention?

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·3 min read
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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 SL Green Realty (NYSE:SLG). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for SL Green Realty

How Fast Is SL Green Realty Growing?

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. We can see that in the last three years SL Green Realty grew its EPS by 9.5% per year. That growth rate is fairly good, assuming the company can keep it up.

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. I note that SL Green Realty's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. To cut to the chase SL Green Realty's EBIT margins dropped last year, and so did its revenue. That is, not a hint of euphemism here, suboptimal.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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

Fortunately, we've got access to analyst forecasts of SL Green Realty's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are SL Green Realty Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$5.0b company like SL Green Realty. But we are reassured by the fact they have invested in the company. Indeed, they hold US$17m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 0.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add SL Green Realty To Your Watchlist?

One positive for SL Green Realty is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. However, before you get too excited we've discovered 4 warning signs for SL Green Realty (2 are a bit concerning!) that you should be aware 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. 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.