Like a puppy chasing its tail, some new investors often chase ‘the next big thing’, even if that means buying ‘story stocks’ without revenue, let alone profit. But as Peter Lynch said in One 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 Prologis (NYSE:PLD). While profit is not necessarily a social good, it’s easy to admire a business that can consistently produce it. 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.
Check out our latest analysis for Prologis
Prologis’s Improving Profits
Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it’s no surprise that some investors are more inclined to invest in profitable businesses. It’s good to see that Prologis’s EPS have grown from US$2.25 to US$2.61 over twelve months. That’s a 16% gain; respectable growth in the broader scheme of things.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of Prologis’s revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I’ve used might not be the best representation of the underlying business. Prologis maintained stable EBIT margins over the last year, all while growing revenue 11% to US$4.9b. That’s a real positive.
You can take a look at the company’s revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
NYSE:PLD Earnings and Revenue History November 24th 2021
You don’t drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Prologis’s future profits.
Are Prologis Insiders Aligned With All Shareholders?
Since Prologis has a market capitalization of US$115b, we wouldn’t expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$224m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.
Does Prologis Deserve A Spot On Your Watchlist?
As I already mentioned, Prologis is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I’d consider keeping the company on a watchlist. It is worth noting though that we have found 4 warning signs for Prologis (2 are significant!) that you need to take into consideration.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.
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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