Does H&R Real Estate Investment Trust (TSE:HR.UN) Deserve A Spot On Your Watchlist?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like H&R Real Estate Investment Trust (TSE:HR.UN), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for H&R Real Estate Investment Trust

How Quickly Is H&R Real Estate Investment 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. Recognition must be given to the that H&R Real Estate Investment Trust has grown EPS by 39% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. Our analysis has highlighted that H&R Real Estate Investment Trust's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. We note that while EBIT margins have improved from 57% to 64%, the company has actually reported a fall in revenue by 12%. That falls short of ideal.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for H&R Real Estate Investment Trust.

Are H&R Real Estate Investment Trust Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.

While H&R Real Estate Investment Trust insiders did net CA$3.6m selling stock over the last year, they invested CA$4.7m, a much higher figure. An optimistic sign for those with H&R Real Estate Investment Trust in their watchlist. It is also worth noting that it was Vice Chair & Independent Lead Trustee Ronald Rutman who made the biggest single purchase, worth CA$3.0m, paying CA$13.05 per share.

Along with the insider buying, another encouraging sign for H&R Real Estate Investment Trust is that insiders, as a group, have a considerable shareholding. With a whopping CA$70m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because H&R Real Estate Investment Trust's CEO, Tom Hofstedter, 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 H&R Real Estate Investment Trust, with market caps between CA$2.7b and CA$8.6b, is around CA$4.4m.

The H&R Real Estate Investment Trust CEO received CA$3.6m in compensation for the year ending December 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Does H&R Real Estate Investment Trust Deserve A Spot On Your Watchlist?

H&R Real Estate Investment Trust's earnings per share have been soaring, with growth rates sky high. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe H&R Real Estate Investment Trust deserves timely attention. You should always think about risks though. Case in point, we've spotted 5 warning signs for H&R Real Estate Investment Trust you should be aware of, and 2 of them are a bit concerning.

Keen growth investors love to see insider buying. Thankfully, H&R Real Estate Investment 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here