We Ran A Stock Scan For Earnings Growth And Lombard Bank Malta (MTSE:LOM) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Lombard Bank Malta (MTSE:LOM), which has not only revenues, but also profits. 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.

View our latest analysis for Lombard Bank Malta

How Fast Is Lombard Bank Malta Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that Lombard Bank Malta's EPS has grown 21% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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 Lombard Bank Malta's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Lombard Bank Malta maintained stable EBIT margins over the last year, all while growing revenue 22% to €73m. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Since Lombard Bank Malta is no giant, with a market capitalisation of €93m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Lombard Bank Malta Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. The median total compensation for CEOs of companies similar in size to Lombard Bank Malta, with market caps under €181m is around €151k.

The Lombard Bank Malta CEO received total compensation of only €11k in the year to December 2021. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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 good governance, more generally.

Does Lombard Bank Malta Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Lombard Bank Malta's strong EPS growth. With swiftly growing earnings, the best days may still be to come, and the modest CEO pay suggests the company is careful with cash. We think that based on its merits alone, this stock is worth watching into the future. However, before you get too excited we've discovered 3 warning signs for Lombard Bank Malta (2 are a bit concerning!) that you should be aware of.

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.