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.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Trulieve Cannabis (CSE:TRUL). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
Trulieve Cannabis’s Earnings Per Share Are Growing.
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, Trulieve Cannabis’s EPS has grown 20% each year, compound, over three years. This has no doubt fuelled the optimism that sees the stock trading on a high multiple of earnings.
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. Trulieve Cannabis maintained stable EBIT margins over the last year, all while growing revenue 103% to US$619m. That’s progress.
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.
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 Trulieve Cannabis’s future profits.
Are Trulieve Cannabis 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. So it is good to see that Trulieve Cannabis insiders have a significant amount of capital invested in the stock. Notably, they have an enormous stake in the company, worth US$1.7b. Coming in at 29% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.
It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between US$4.0b and US$12b, like Trulieve Cannabis, the median CEO pay is around US$3.8m.
The CEO of Trulieve Cannabis only received US$1.1m in total compensation for the year ending . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. 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 a culture of integrity, in a broader sense.
Does Trulieve Cannabis Deserve A Spot On Your Watchlist?
You can’t deny that Trulieve Cannabis has grown its earnings per share at a very impressive rate. That’s attractive. If you need more convincing beyond that EPS growth rate, don’t forget about the reasonable remuneration and the high insider ownership. This may only be a fast rundown, but the takeaway for me is that Trulieve Cannabis is worth keeping an eye on. Don’t forget that there may still be risks. For instance, we’ve identified 5 warning signs for Trulieve Cannabis (1 can’t be ignored) you should be aware of.
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.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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