Should You Be Adding City Union Bank (NSE:CUB) To Your Watchlist Today?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 City Union Bank (NSE:CUB). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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How Quickly Is City Union Bank Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years City Union Bank grew its EPS by 14% per year. That growth rate is fairly good, assuming the company can keep it up.

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 City Union Bank's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note City Union Bank achieved similar EBIT margins to last year, revenue grew by a solid 14% to ₹30b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

See our latest analysis for City Union Bank

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

Are City Union Bank Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that City Union Bank insiders have a significant amount of capital invested in the stock. We note that their impressive stake in the company is worth ₹9.0b. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. The median total compensation for CEOs of companies similar in size to City Union Bank, with market caps between ₹86b and ₹276b, is around ₹47m.

City Union Bank's CEO took home a total compensation package worth ₹25m in the year leading up to March 2024. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add City Union Bank To Your Watchlist?

As previously touched on, City Union Bank is a growing business, which is encouraging. Earnings growth might be the main attraction for City Union Bank, but the fun does not stop there. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. We should say that we've discovered 1 warning sign for City Union Bank that you should be aware of before investing here.

Although City Union Bank certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Indian companies that not only boast of strong growth but have strong insider backing.

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.