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 Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
So if you're like me, you might be more interested in profitable, growing companies, like Terreno Realty (NYSE:TRNO). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
View our latest analysis for Terreno Realty
How Fast Is Terreno Realty Growing Its Earnings Per Share?
In the last three years Terreno Realty's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Terreno Realty boosted its trailing twelve month EPS from US$0.90 to US$1.01, in the last year. I doubt many would complain about that 12% gain.
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. Terreno Realty maintained stable EBIT margins over the last year, all while growing revenue 13% to US$165m. That's a real positive.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
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 Terreno Realty?
Are Terreno Realty Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The first bit of good news is that no Terreno Realty insiders reported share sales in the last twelve months. But the really good news is that Independent Director David Lee spent US$210k buying stock stock, at an average price of around US$42.04. To me that means at least one insider thinks that the company is doing well - and they are backing that view with cash.
The good news, alongside the insider buying, for Terreno Realty bulls is that insiders (collectively) have a meaningful investment in the stock. With a whopping US$94m worth of shares as a group, insiders have plenty riding on the company's success. That's certainly enough to make me think that management will be very focussed on long term growth.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, W. Baird is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations between US$2.0b and US$6.4b, like Terreno Realty, the median CEO pay is around US$4.9m.
The Terreno Realty CEO received total compensation of just US$2.1m in the year to December 2018. That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. 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. I'd also argue reasonable pay levels attest to good decision making more generally.
Is Terreno Realty Worth Keeping An Eye On?
One important encouraging feature of Terreno Realty is that it is growing profits. On top of that, we've seen insiders buying shareseven though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. 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 Terreno Realty. You might benefit from giving it a glance today.
The good news is that Terreno Realty is not the only growth stock with insider buying. Here'sa 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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