Does Bank Leumi le- Israel B.M (TLV:LUMI) Deserve A Spot On Your Watchlist?

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Bank Leumi le- Israel B.M (TLV:LUMI). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Bank Leumi le- Israel B.M

How Fast Is Bank Leumi le- Israel B.M Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. As a tree reaches steadily for the sky, Bank Leumi le- Israel B.M's EPS has grown 19% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. I note that Bank Leumi le- Israel B.M's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Bank Leumi le- Israel B.M's EBIT margins were flat over the last year, revenue grew by a solid 54% to ₪16b. That's progress.

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

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 Bank Leumi le- Israel B.M?

Are Bank Leumi le- Israel B.M Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a ₪45b company like Bank Leumi le- Israel B.M. But we do take comfort from the fact that they are investors in the company. Indeed, they hold ₪49m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations over ₪25b, like Bank Leumi le- Israel B.M, the median CEO pay is around ₪5.1m.

The Bank Leumi le- Israel B.M CEO received ₪3.3m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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. I'd also argue reasonable pay levels attest to good decision making more generally.

Should You Add Bank Leumi le- Israel B.M To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Bank Leumi le- Israel B.M's strong EPS growth. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. This may only be a fast rundown, but the takeaway for me is that Bank Leumi le- Israel B.M is worth keeping an eye on. We should say that we've discovered 2 warning signs for Bank Leumi le- Israel B.M (1 doesn't sit too well with us!) that you should be aware of before investing here.

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.

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.

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