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Should You Be Adding Mid-America Apartment Communities (NYSE:MAA) To Your Watchlist Today?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Mid-America Apartment Communities (NYSE:MAA), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Mid-America Apartment Communities with the means to add long-term value to shareholders.

View our latest analysis for Mid-America Apartment Communities

Mid-America Apartment Communities' Earnings Per Share Are Growing

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. Shareholders will be happy to know that Mid-America Apartment Communities' EPS has grown 35% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Mid-America Apartment Communities shareholders can take confidence from the fact that EBIT margins are up from 25% to 29%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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.

earnings-and-revenue-history
earnings-and-revenue-history

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 Mid-America Apartment Communities' future profits.

Are Mid-America Apartment Communities Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$20b company like Mid-America Apartment Communities. But we do take comfort from the fact that they are investors in the company. We note that their impressive stake in the company is worth US$127m. We note that this amounts to 0.6% of the company, which may be small owing to the sheer size of Mid-America Apartment Communities but it's still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations over US$8.0b, like Mid-America Apartment Communities, the median CEO pay is around US$13m.

Mid-America Apartment Communities offered total compensation worth US$7.7m to its CEO in the year to December 2021. That is actually below the median for CEO's of similarly 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Mid-America Apartment Communities To Your Watchlist?

You can't deny that Mid-America Apartment Communities 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 key takeaway is that Mid-America Apartment Communities is worth keeping an eye on. Before you take the next step you should know about the 3 warning signs for Mid-America Apartment Communities that we have uncovered.

Although Mid-America Apartment Communities certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.

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