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. 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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Bank of Princeton (NASDAQ:BPRN). 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.
Bank of Princeton's Earnings Per Share Are Growing.
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That makes EPS growth an attractive quality for any company. Impressively, Bank of Princeton has grown EPS by 17% 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 Bank of Princeton's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Bank of Princeton maintained stable EBIT margins over the last year, all while growing revenue 28% to US$60m. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of Bank of Princeton's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Bank of Princeton Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Any way you look at it Bank of Princeton shareholders can gain quiet confidence from the fact that insiders shelled out US$462k to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. Zooming in, we can see that the biggest insider purchase was by Martin Tuchman for US$119k worth of shares, at about US$29.85 per share.
Along with the insider buying, another encouraging sign for Bank of Princeton is that insiders, as a group, have a considerable shareholding. To be specific, they have US$44m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 22% of the company, demonstrating a degree of high-level alignment with shareholders.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Ed Dietzler, is paid less than the median for similar sized companies. For companies with market capitalizations between US$100m and US$400m, like Bank of Princeton, the median CEO pay is around US$1.2m.
Bank of Princeton offered total compensation worth US$683k to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar 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. It can also be a sign of good governance, more generally.
Does Bank of Princeton Deserve A Spot On Your Watchlist?
You can't deny that Bank of Princeton has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. What about risks? Every company has them, and we've spotted 2 warning signs for Bank of Princeton (of which 1 is concerning!) you should know about.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Bank of Princeton, you'll probably love this free list of growing companies that insiders are 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.
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