It’s only natural that many investors, especially those who are new to the game, prefer to buy shares in ‘sexy’ stocks with a good story, even if those businesses lose money. 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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Atlantic Union Bankshares (NASDAQ:AUB). While profit is not necessarily a social good, it’s easy to admire a business than can consistently produce it. 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.
Atlantic Union Bankshares’s Earnings Per Share Are Growing.
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Atlantic Union Bankshares managed to grow EPS by 12% per year, over three years. 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 Atlantic Union Bankshares’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. Atlantic Union Bankshares maintained stable EBIT margins over the last year, all while growing revenue 31% to US$543m. That’s a real positive.
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 Atlantic Union Bankshares?
Are Atlantic Union Bankshares 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. As a result, I’m encouraged by the fact that insiders own Atlantic Union Bankshares shares worth a considerable sum. Given insiders own a small fortune of shares, currently valued at US$61m, they have plenty of motivation to push the business to succeed. That’s certainly enough to make me think that management will be very focussed on long term growth.
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. I discovered that the median total compensation for the CEOs of companies like Atlantic Union Bankshares with market caps between US$2.0b and US$6.4b is about US$5.1m.
The Atlantic Union Bankshares CEO received total compensation of just US$2.3m in the year to December 2018. That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Is Atlantic Union Bankshares Worth Keeping An Eye On?
As I already mentioned, Atlantic Union Bankshares is a growing business, which is what I like to see. The fact that EPS is growing is a genuine positive for Atlantic Union Bankshares, but the pretty picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, I’d argue this one is worthy of the watchlist, at least. If you think Atlantic Union Bankshares might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.
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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