Here's Why We Think Bendigo and Adelaide Bank (ASX:BEN) Might Deserve Your Attention Today

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Bendigo and Adelaide Bank (ASX:BEN), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Bendigo and Adelaide Bank

How Quickly Is Bendigo and Adelaide Bank Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Bendigo and Adelaide Bank has grown EPS by 19% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. Our analysis has highlighted that Bendigo and Adelaide Bank's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Bendigo and Adelaide Bank maintained stable EBIT margins over the last year, all while growing revenue 6.2% to AU$1.8b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Bendigo and Adelaide Bank's future profits.

Are Bendigo and Adelaide Bank Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We haven't seen any insiders selling Bendigo and Adelaide Bank shares, in the last year. Add in the fact that David Foster, the Independent Chairman of the Board of the company, paid AU$35k for shares at around AU$9.50 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Bendigo and Adelaide Bank.

The good news, alongside the insider buying, for Bendigo and Adelaide Bank bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold AU$22m worth of its stock. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 0.4%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Bendigo and Adelaide Bank's CEO, Marnie Baker, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Bendigo and Adelaide Bank with market caps between AU$3.0b and AU$9.7b is about AU$3.3m.

The Bendigo and Adelaide Bank CEO received AU$2.6m in compensation for the year ending June 2023. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does Bendigo and Adelaide Bank Deserve A Spot On Your Watchlist?

You can't deny that Bendigo and Adelaide Bank has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. However, before you get too excited we've discovered 2 warning signs for Bendigo and Adelaide Bank that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Bendigo and Adelaide Bank, you'll probably love this curated collection of companies in AU that have witnessed growth alongside 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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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.