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

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Bank Leumi le-Israel B.M (TLV:LUMI). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Bank Leumi le-Israel B.M

How Quickly Is Bank Leumi le-Israel B.M Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Bank Leumi le-Israel B.M has managed to grow EPS by 26% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. It's noted 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 our analysis of its margins. EBIT margins for Bank Leumi le-Israel B.M remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 3.8% to ₪17b. 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.

Fortunately, we've got access to analyst forecasts of Bank Leumi le-Israel B.M'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 Leumi le-Israel B.M Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. The median total compensation for CEOs of companies similar in size to Bank Leumi le-Israel B.M, with market caps over ₪28b, is around ₪4.1m.

The Bank Leumi le-Israel B.M CEO received ₪3.3m in compensation for the year ending December 2021. 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 a culture of integrity, in a broader sense.

Does Bank Leumi le-Israel B.M Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Bank Leumi le-Israel B.M's strong EPS growth. Strong EPS growth is a great look for the company and reasonable CEO compensation sweetens the deal for investors ass it alludes to management being conscious of frivolous spending. Based on these factors, this stock may well deserve a spot on your watchlist, or even a little further research. Before you take the next step you should know about the 1 warning sign for Bank Leumi le-Israel B.M that we have uncovered.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.