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 Warren Buffett has mused, ‘If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.’ When they buy such story stocks, investors are all too often the patsy.
So if you’re like me, you might be more interested in profitable, growing companies, like Flagstar Bancorp (NYSE:FBC). While profit is not necessarily a social good, it’s easy to admire a business than 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.
How Quickly Is Flagstar Bancorp Increasing Earnings Per Share?
As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. Over the last three years, Flagstar Bancorp has grown EPS by 13% per year. That’s a good rate of growth, if it can be sustained.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Not all of Flagstar Bancorp’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. While we note Flagstar Bancorp’s EBIT margins were flat over the last year, revenue grew by a solid 10% to US$1.0b. That’s progress.
While we live in the present moment at all times, there’s no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Flagstar Bancorp?
Are Flagstar Bancorp Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
In the last twelve months Flagstar Bancorp insiders spent US$45k on stock; good news for shareholders. While this isn’t much, we also note an absence of sales.
Along with the insider buying, another encouraging sign for Flagstar Bancorp is that insiders, as a group, have a considerable shareholding. To be specific, they have US$25m worth of shares. That’s a lot of money, and no small incentive to work hard. Despite being just 1.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Should You Add Flagstar Bancorp To Your Watchlist?
As I already mentioned, Flagstar Bancorp is a growing business, which is what I like to see. On top of that, we’ve seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Of course, just because Flagstar Bancorp is growing does not mean it is undervalued. If you’re wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
The good news is that Flagstar Bancorp is not the only growth stock with insider buying. Here’s a list of them… 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
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