If You Like EPS Growth Then Check Out Affinity Bancshares (NASDAQ:AFBI) Before It's Too Late

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like Affinity Bancshares (NASDAQ:AFBI). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for Affinity Bancshares

How Quickly Is Affinity Bancshares Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. I, for one, am blown away by the fact that Affinity Bancshares has grown EPS by 51% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

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 Affinity Bancshares's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note Affinity Bancshares's EBIT margins were flat over the last year, revenue grew by a solid 54% to US$22m. That's a real positive.

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.

Since Affinity Bancshares is no giant, with a market capitalization of US$83m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Affinity Bancshares Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Not only did Affinity Bancshares insiders refrain from selling stock during the year, but they also spent US$108k buying it. That puts the company in a nice light, as it makes me think its leaders are feeling confident. Zooming in, we can see that the biggest insider purchase was by Independent Director Robin Reich for US$75k worth of shares, at about US$10.78 per share.

Along with the insider buying, another encouraging sign for Affinity Bancshares is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$12m worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 15% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Affinity Bancshares Deserve A Spot On Your Watchlist?

Affinity Bancshares's earnings have taken off like any random crypto-currency did, back in 2017. What's more insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Affinity Bancshares deserves timely attention. Still, you should learn about the 3 warning signs we've spotted with Affinity Bancshares (including 1 which makes us a bit uncomfortable) .

As a growth investor I do like to see insider buying. But Affinity Bancshares isn't the only one. You can see a 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. 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.
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