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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like W. P. Carey (NYSE:WPC). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.
How Fast Is W. P. Carey Growing Its Earnings Per Share?
Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. Like a wedge-tailed eagle on the wind, W. P. Carey's EPS soared from US$1.78 to US$2.61, in just one year. That's a impressive gain of 46%.
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. Not all of W. P. Carey's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. It seems W. P. Carey is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not bad, but it doesn't point to ongoing future growth, either.
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.
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 W. P. Carey EPS 100% free.
Are W. P. Carey Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
The good news is that W. P. Carey insiders spent a whopping US$2.1m on stock in just one year, and I didn't see any selling. And so I find myself almost expectant, and certainly hopeful, that this large outlay signals prescient optimism for the business. We also note that it was the CEO & Director, Jason Fox, who made the biggest single acquisition, paying US$460k for shares at about US$46.03 each.
Along with the insider buying, another encouraging sign for W. P. Carey is that insiders, as a group, have a considerable shareholding. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$125m. 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.
While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. The cherry on top is that the CEO, Jason Fox is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations over US$8.0b, like W. P. Carey, the median CEO pay is around US$10m.
The W. P. Carey CEO received US$6.9m in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. 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 a culture of integrity, in a broader sense.
Should You Add W. P. Carey To Your Watchlist?
Given my belief that share price follows earnings per share you can easily imagine how I feel about W. P. Carey's strong EPS growth. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. You still need to take note of risks, for example - W. P. Carey has 1 warning sign we think you should be aware of.
The good news is that W. P. Carey 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.
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.
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