With EPS Growth And More, Chicago Atlantic Real Estate Finance (NASDAQ:REFI) Makes An Interesting Case

editorial-team@simplywallst.com (Simply Wall St)

January 1, 2024 4 min read

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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Chicago Atlantic Real Estate Finance (NASDAQ:REFI). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Chicago Atlantic Real Estate Finance

How Fast Is Chicago Atlantic Real Estate Finance Growing Its Earnings Per Share?

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Chicago Atlantic Real Estate Finance has grown its trailing twelve month EPS from US$1.92 to US$2.01, in the last year. That's a fair increase of 4.6%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of Chicago Atlantic Real Estate Finance's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Chicago Atlantic Real Estate Finance maintained stable EBIT margins over the last year, all while growing revenue 27% to US$53m. 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.

earnings-and-revenue-history — NasdaqGM:REFI Earnings and Revenue History January 1st 2024

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Chicago Atlantic Real Estate Finance's future EPS 100% free.

Are Chicago Atlantic Real Estate Finance Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

With strong conviction, Chicago Atlantic Real Estate Finance insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the Executive Chairman of the Board of Chicago Atlantic REIT Manager, John Mazarakis, paid US$132k to buy shares at an average price of US$13.19. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

Along with the insider buying, another encouraging sign for Chicago Atlantic Real Estate Finance is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at US$42m. That's a lot of money, and no small incentive to work hard. That amounts to 14% of the company, demonstrating a degree of high-level alignment with shareholders.

Is Chicago Atlantic Real Estate Finance Worth Keeping An Eye On?

One important encouraging feature of Chicago Atlantic Real Estate Finance is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. We should say that we've discovered 2 warning signs for Chicago Atlantic Real Estate Finance (1 is significant!) that you should be aware of before investing here.

Keen growth investors love to see insider buying. Thankfully, Chicago Atlantic Real Estate Finance isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by recent insider buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.