NYSE:CTRE
Do CareTrust REIT's (NASDAQ:CTRE) Earnings Warrant Your Attention?
May 28, 2021 • Updated January 29, 2023
Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
In contrast to all that, I prefer to spend time on companies like CareTrust REIT (NASDAQ:CTRE), which has not only revenues, but also profits. 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 CareTrust REIT
How Fast Is CareTrust REIT Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, CareTrust REIT has grown EPS by 29% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
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. I note that, last year, CareTrust REIT's revenue from operations was lower than its revenue, so that could distort my analysis of its margins. The good news is that CareTrust REIT is growing revenues, and EBIT margins improved by 3.3 percentage points to 58%, over the last year. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
NasdaqGS:CTRE Earnings and Revenue History May 29th 2021
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 check this interactive chart depicting future EPS estimates, for CareTrust REIT?
Are CareTrust REIT Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own CareTrust REIT shares worth a considerable sum. Indeed, they hold US$43m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 1.9% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Is CareTrust REIT Worth Keeping An Eye On?
You can't deny that CareTrust REIT has grown its earnings per share at a very impressive rate. That's attractive. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. It is worth noting though that we have found 2 warning signs for CareTrust REIT that you need to take into consideration.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.
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What are the risks and opportunities for CareTrust REIT?
CareTrust REIT
CareTrust REIT, Inc. is a self-administered, publicly-traded real estate investment trust engaged in the ownership, acquisition, development and leasing of skilled nursing, seniors housing and other healthcare-related properties.
Trading at 38.6% below our estimate of its fair value
Earnings are forecast to grow 108.22% per year
Debt is not well covered by operating cash flow
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. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
About NYSE:CTRE
Reasonable growth potential average dividend payer.
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