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Here's Why I Think Crown Castle International (REIT) (NYSE:CCI) Might Deserve Your Attention Today

Simply Wall St. ·  Feb 12, 2020 11:02

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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. But as Peter Lynch said inOne Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Crown Castle International (REIT) (NYSE:CCI). 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.

See our latest analysis for Crown Castle International (REIT)

How Fast Is Crown Castle International (REIT) Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. As a tree reaches steadily for the sky, Crown Castle International (REIT)'s EPS has grown 26% each year, compound, over three years. This has no doubt fuelled the optimism that sees the stock trading on a high multiple of earnings.

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 Crown Castle International (REIT)'s revenue this year is revenuefrom operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. The good news is that Crown Castle International (REIT) is growing revenues, and EBIT margins improved by 2.1 percentage points to 29%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

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.

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While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not checkthis interactive chart depicting future EPS estimates, for Crown Castle International (REIT)?

Are Crown Castle International (REIT) Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We did see some selling in the last twelve months, but that's insignificant compared to the whopping US$5.8m that the Chairman of the Board, J. Martin spent acquiring shares. The average price paid was about US$126. The quantum of that insider purchase is both rare and a sight to behold, not unlike an endangered Amur Leopard in the wild.

Along with the insider buying, another encouraging sign for Crown Castle International (REIT) is that insiders, as a group, have a considerable shareholding. Notably, they have an enormous stake in the company, worth US$280m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

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, Jay Brown is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like Crown Castle International (REIT), with market caps over US$8.0b, is about US$11m.

The Crown Castle International (REIT) CEO received US$9.0m in compensation for the year ending December 2018. That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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 Crown Castle International (REIT) To Your Watchlist?

For growth investors like me, Crown Castle International (REIT)'s raw rate of earnings growth is a beacon in the night. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So it's fair to say I think this stock may well deserve a spot on your watchlist. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusivediscounted cashflow valuationof Crown Castle International (REIT). You might benefit from giving it a glance today.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Crown Castle International (REIT), you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction

If you spot an error that warrants correction, please contact the editor ateditorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

The above content is for informational or educational purposes only and does not constitute any investment advice related to Futu. Although we strive to ensure the truthfulness, accuracy, and originality of all such content, we cannot guarantee it.
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