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 currently lacks a track record of revenue and profit. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Physicians Realty Trust (NYSE:DOC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Physicians Realty Trust with the means to add long-term value to shareholders.
How Quickly Is Physicians Realty Trust Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Physicians Realty Trust grew its EPS by 8.0% per year. That's a good rate of growth, if it can be sustained.
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. Not all of Physicians Realty Trust's 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. While Physicians Realty Trust did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future may hold further growth, especially if EBIT margins can remain steady.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
NYSE:DOC Earnings and Revenue History August 21st 2022
Are Physicians Realty Trust 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Over the last 12 months Physicians Realty Trust insiders spent US$171k more buying shares than they received from selling them. Although some people may hesitate due to the share sales, the fact that insiders bought more than they sold, is a positive thing to note. We also note that it was the Executive VP, Jeffrey Theiler, who made the biggest single acquisition, paying US$150k for shares at about US$16.26 each.
On top of the insider buying, it's good to see that Physicians Realty Trust insiders have a valuable investment in the business. As a matter of fact, their holding is valued at US$37m. That's a lot of money, and no small incentive to work hard. Despite being just 0.9% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Physicians Realty Trust's CEO, John Thomas, is paid at a relatively modest level when compared to other CEOs for companies of this size. The median total compensation for CEOs of companies similar in size to Physicians Realty Trust, with market caps between US$2.0b and US$6.4b, is around US$6.6m.
The Physicians Realty Trust CEO received US$4.9m in compensation for the year ending December 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Does Physicians Realty Trust Deserve A Spot On Your Watchlist?
One positive for Physicians Realty Trust is that it is growing EPS. That's nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. That makes the company a prime candidate for your watchlist - and arguably a research priority. What about risks? Every company has them, and we've spotted 5 warning signs for Physicians Realty Trust (of which 1 makes us a bit uncomfortable!) you should know about.
Keen growth investors love to see insider buying. Thankfully, Physicians Realty Trust 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.
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