Here's Why Bank of Valletta (MTSE:BOV) Has Caught The Eye Of Investors

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 of Valletta (MTSE:BOV). 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.

Check out our latest analysis for Bank of Valletta

Bank of Valletta's Improving Profits

Over the last three years, Bank of Valletta has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. To the delight of shareholders, Bank of Valletta's EPS soared from €0.25 to €0.34, over the last year. That's a commendable gain of 34%.

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. It's noted that Bank of Valletta'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 of Valletta remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 18% to €492m. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Bank of Valletta's balance sheet strength, before getting too excited.

Are Bank of Valletta 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. 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.

We haven't seen any insiders selling Bank of Valletta shares, in the last year. With that in mind, it's heartening that Robert Suban, the company insider of the company, paid €9.3k for shares at around €1.68 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

It's commendable to see that insiders have been buying shares in Bank of Valletta, but there is more evidence of shareholder friendly management. Namely, Bank of Valletta has a very reasonable level of CEO pay. Our analysis has discovered that the median total compensation for the CEOs of companies like Bank of Valletta with market caps between €380m and €1.5b is about €971k.

The Bank of Valletta CEO received total compensation of just €403k in the year to December 2023. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Bank of Valletta To Your Watchlist?

For growth investors, Bank of Valletta's raw rate of earnings growth is a beacon in the night. And that's not the only positive either. We have both insider buying and reasonable and remuneration to consider. The overriding message from this quick rundown is yes, this stock is worth investigating further. It is worth noting though that we have found 1 warning sign for Bank of Valletta that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Bank of Valletta, you'll probably love this curated collection of companies in MT that have an attractive valuation 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.