The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital – so investors should be cautious that they’re not throwing good money after bad.
So if this idea of high risk and high reward doesn’t suit, you might be more interested in profitable, growing companies, like Canadian Net Real Estate Investment Trust (CVE:NET.UN). While this doesn’t necessarily speak to whether it’s undervalued, the profitability of the business is enough to warrant some appreciation – especially if its growing.
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Canadian Net Real Estate Investment Trust grew its EPS by 9.2% per year. That’s a pretty good rate, if the company can sustain it.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it’s a great way for a company to maintain a competitive advantage in the market. It’s noted that Canadian Net Real Estate Investment Trust’s revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While Canadian Net Real Estate Investment Trust may have maintained EBIT margins over the last year, revenue has fallen. While this may raise concerns, investors should investigate the reasoning behind this.
The chart below shows how the company’s bottom and top lines have progressed over time. For finer detail, click on the image.
View our latest analysis for Canadian Net Real Estate Investment Trust
Since Canadian Net Real Estate Investment Trust is no giant, with a market capitalisation of CA$114m, you should definitely check its cash and debt before getting too excited about its prospects.
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don’t always get it right.
Despite CA$69k worth of sales, Canadian Net Real Estate Investment Trust insiders have overwhelmingly been buying the stock, spending CA$352k on purchases in the last twelve months. You could argue that level of buying implies genuine confidence in the business. It is also worth noting that it was Independent Trustee Francois-Olivier Laplante who made the biggest single purchase, worth CA$130k, paying CA$5.20 per share.
Along with the insider buying, another encouraging sign for Canadian Net Real Estate Investment Trust is that insiders, as a group, have a considerable shareholding. Indeed, they hold CA$18m worth of its stock. That’s a lot of money, and no small incentive to work hard. Those holdings account for over 16% of the company; visible skin in the game.
One positive for Canadian Net Real Estate Investment Trust is that it is growing EPS. That’s nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. We should say that we’ve discovered 3 warning signs for Canadian Net Real Estate Investment Trust (1 is potentially serious!) that you should be aware of before investing here.
Keen growth investors love to see insider activity. Thankfully, Canadian Net Real Estate Investment Trust isn’t the only one. You can see a a curated list of Canadian companies which have exhibited consistent growth accompanied by high insider ownership.
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.