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

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 United Overseas Bank (SGX:U11), which has not only revenues, but also profits. 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.

How Quickly Is United Overseas Bank Increasing Earnings Per Share?

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 means EPS growth is considered a real positive by most successful long-term investors. United Overseas Bank managed to grow EPS by 15% per year, over three years. That's a pretty good rate, if the company can sustain it.

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. Not all of United Overseas Bank's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for United Overseas Bank remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 2.7% to S$13b. 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.

Check out our latest analysis for United Overseas Bank

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of United Overseas Bank's forecast profits?

Are United Overseas Bank Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The real kicker here is that United Overseas Bank insiders spent a staggering S$8.1m on acquiring shares in just one year, without single share being sold in the meantime. 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$7.7m, paying S$38.65 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$3.6b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Does United Overseas Bank Deserve A Spot On Your Watchlist?

One important encouraging feature of United Overseas Bank is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. We don't want to rain on the parade too much, but we did also find 1 warning sign for United Overseas Bank that you need to be mindful of.

Keen growth investors love to see insider activity. 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 high insider ownership.

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.