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. 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 contrast to all that, I prefer to spend time on companies like Triumph Bancorp (NASDAQ:TBK), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.
Triumph Bancorp’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 means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, Triumph Bancorp’s EPS has grown 24% each year, compound, over three years. As a general rule, we’d say that if a company can keep up that sort of growth, shareholders will be smiling.
One way to double-check a company’s growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. I note that Triumph Bancorp’s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Triumph Bancorp maintained stable EBIT margins over the last year, all while growing revenue 38% to US$266m. That’s progress.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Triumph Bancorp’s forecast profits?
Are Triumph Bancorp Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.
Any way you look at it Triumph Bancorp shareholders can gain quiet confidence from the fact that insiders shelled out US$535k 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 Director Justin Trail for US$100k worth of shares, at about US$31.11 per share.
The good news, alongside the insider buying, for Triumph Bancorp bulls is that insiders (collectively) have a meaningful investment in the stock. With a whopping US$67m worth of shares as a group, insiders have plenty riding on the company’s success. At 8.6% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.
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, Aaron Graft, is paid less than the median for similar sized companies. For companies with market capitalizations between US$400m and US$1.6b, like Triumph Bancorp, the median CEO pay is around US$2.7m.
The CEO of Triumph Bancorp only received US$1.1m in total compensation for the year ending December 2018. That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation isn’t a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Should You Add Triumph Bancorp To Your Watchlist?
For growth investors like me, Triumph Bancorp’s raw rate of earnings growth is a beacon in the night. 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. Once you’ve identified a business you like, the next step is to consider what you think it’s worth. And right now is your chance to view our exclusive discounted cashflow valuation of Triumph Bancorp. You might benefit from giving it a glance today.
The good news is that Triumph 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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.