Here's Why I Think Bank of the James Financial Group (NASDAQ:BOTJ) Might Deserve Your Attention Today

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In contrast to all that, I prefer to spend time on companies like Bank of the James Financial Group (NASDAQ:BOTJ), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Bank of the James Financial Group

How Fast Is Bank of the James Financial Group Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Bank of the James Financial Group has managed to grow EPS by 22% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Not all of Bank of the James Financial Group'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. Bank of the James Financial Group maintained stable EBIT margins over the last year, all while growing revenue 19% to US$38m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Bank of the James Financial Group isn't a huge company, given its market capitalization of US$74m. That makes it extra important to check on its balance sheet strength.

Are Bank of the James Financial Group Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Any way you look at it Bank of the James Financial Group shareholders can gain quiet confidence from the fact that insiders shelled out US$296k to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. It is also worth noting that it was Independent Director Watt Foster who made the biggest single purchase, worth US$169k, paying US$14.00 per share.

Is Bank of the James Financial Group Worth Keeping An Eye On?

For growth investors like me, Bank of the James Financial Group's raw rate of earnings growth is a beacon in the night. The growth rate whets my appetite for research, and the insider buying only increases my interest in the stock. To put it succinctly; Bank of the James Financial Group is a strong candidate for your watchlist. Still, you should learn about the 2 warning signs we've spotted with Bank of the James Financial Group .

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Bank of the James Financial Group, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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.

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