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 Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’
So if you’re like me, you might be more interested in profitable, growing companies, like Signature Bank (NASDAQ:SBNY). Now, I’m not saying that the stock is necessarily undervalued today; but I can’t shake an appreciation for the profitability of the business itself. 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.
View our latest analysis for Signature Bank
Signature Bank’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 means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Signature Bank grew its EPS by 15% per year. That’s a pretty good rate, if the company can sustain it.
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 Signature Bank’s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Signature Bank maintained stable EBIT margins over the last year, all while growing revenue 18% to US$1.3b. That’s a real positive.
You can take a look at the company’s revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
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 Signature Bank?
Are Signature Bank Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$7.8b company like Signature Bank. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$203m. This suggests to me that leadership will be very mindful of shareholders’ interests when making decisions!
Is Signature Bank Worth Keeping An Eye On?
One positive for Signature Bank is that it is growing EPS. That’s nice to see. If that’s not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I’d consider keeping the company on a watchlist. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Signature Bank.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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