Here's Why We Think American Realty Investors (NYSE:ARL) Might Deserve Your Attention Today
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like American Realty Investors (NYSE:ARL), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide American Realty Investors with the means to add long-term value to shareholders.
View our latest analysis for American Realty Investors
American Realty Investors' Earnings Per Share Are Growing
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. It certainly is nice to see that American Realty Investors has managed to grow EPS by 36% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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. Not all of American Realty Investors' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. The good news is that American Realty Investors is growing revenues, and EBIT margins improved by 92.7 percentage points to 91%, over the last year. Both of which are great metrics to check off for potential growth.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
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 American Realty Investors' balance sheet strength, before getting too excited.
Are American Realty Investors Insiders Aligned With All Shareholders?
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. 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.
American Realty Investors top brass are certainly in sync, not having sold any shares, over the last year. But the real excitement comes from the US$67k that Director Bradford Phillips spent buying shares (at an average price of about US$15.47). It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.
Does American Realty Investors Deserve A Spot On Your Watchlist?
You can't deny that American Realty Investors has grown its earnings per share at a very impressive rate. That's attractive. Growth in EPS isn't the only striking feature with company insiders adding to their holdings being another noteworthy vote of confidence for the company. In essence, your time will not be wasted checking out American Realty Investors in more detail. What about risks? Every company has them, and we've spotted 1 warning sign for American Realty Investors you should know about.
The good news is that American Realty Investors 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.
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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.
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