Do United Overseas Bank's (SGX:U11) Earnings Warrant Your Attention?

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 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.

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 United Overseas Bank (SGX:U11). 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.

View our latest analysis for United Overseas Bank

How Fast Is United Overseas Bank Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. Impressively, United Overseas Bank has grown EPS by 26% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Our analysis has highlighted that United Overseas Bank's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. United Overseas Bank maintained stable EBIT margins over the last year, all while growing revenue 19% to S$13b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for United Overseas Bank's future profits.

Are United Overseas Bank 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The good news is that United Overseas Bank insiders spent a whopping S$2.9m on stock in just one year, without so much as a single sale. Knowing this, United Overseas Bank will have have all eyes on them in anticipation for the what could happen in the near future. It is also worth noting that it was Deputy Chairman & CEO Ee Cheong Wee who made the biggest single purchase, worth S$2.8m, paying S$28.50 per share.

The good news, alongside the insider buying, for United Overseas Bank bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enviable stake in the company, worth S$2.5b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Is United Overseas Bank Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into United Overseas Bank's strong EPS growth. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. These things considered, this is one stock worth watching. What about risks? Every company has them, and we've spotted 1 warning sign for United Overseas Bank you should know about.

Keen growth investors love to see insider buying. Thankfully, United Overseas Bank isn't the only one. You can see a a curated list of Singaporean companies which have exhibited consistent growth accompanied by recent insider buying.

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.