Stock Analysis

With EPS Growth And More, Bank of Nova Scotia (TSE:BNS) Makes An Interesting Case

TSX:BNS
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The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Bank of Nova Scotia (TSE:BNS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Bank of Nova Scotia with the means to add long-term value to shareholders.

View our latest analysis for Bank of Nova Scotia

How Quickly Is Bank of Nova Scotia Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Bank of Nova Scotia has grown EPS by 7.5% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of Bank of Nova Scotia's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Bank of Nova Scotia maintained stable EBIT margins over the last year, all while growing revenue 15% to CA$30b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

earnings-and-revenue-history
TSX:BNS Earnings and Revenue History July 7th 2022

Fortunately, we've got access to analyst forecasts of Bank of Nova Scotia's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Bank of Nova Scotia Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, 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.

Shareholders in Bank of Nova Scotia will be more than happy to see insiders committing themselves to the company, spending CA$536k on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. We also note that it was the Group Head of International Banking & Digital Transformation, Ignacio Deschamps, who made the biggest single acquisition, paying CA$299k for shares at about CA$85.40 each.

On top of the insider buying, it's good to see that Bank of Nova Scotia insiders have a valuable investment in the business. As a matter of fact, their holding is valued at CA$25m. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.03%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Does Bank of Nova Scotia Deserve A Spot On Your Watchlist?

One positive for Bank of Nova Scotia is that it is growing EPS. That's nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. That makes the company a prime candidate for your watchlist - and arguably a research priority. Now, you could try to make up your mind on Bank of Nova Scotia by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Bank of Nova Scotia, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Valuation is complex, but we're helping make it simple.

Find out whether Bank of Nova Scotia is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.