Like a puppy chasing its tail, some new investors often chase ‘the next big thing’, even if that means buying ‘story stocks’ without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
So if you’re like me, you might be more interested in profitable, growing companies, like Bank of the James Financial Group (NASDAQ:BOTJ). While profit is not necessarily a social good, it’s easy to admire a business than 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.
Bank of the James Financial Group’s Earnings Per Share Are Growing.
As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Bank of the James Financial Group grew its EPS by 4.2% per year. While that sort of growth rate isn’t amazing, it does show the business is growing.
One way to double-check a company’s growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. 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. While we note Bank of the James Financial Group’s EBIT margins were flat over the last year, revenue grew by a solid 13% to US$28m. That’s a real positive.
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.
Since Bank of the James Financial Group is no giant, with a market capitalization of US$65m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Bank of the James Financial Group Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.
It’s good to see Bank of the James Financial Group insiders walking the walk, by spending US$351k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. Zooming in, we can see that the biggest insider purchase was by Lydia Langley for US$108k worth of shares, at about US$14.30 per share.
Should You Add Bank of the James Financial Group To Your Watchlist?
As I already mentioned, Bank of the James Financial Group is a growing business, which is what I like to see. While some companies are struggling to grow EPS, Bank of the James Financial Group seems free from that morose affliction. The gravy on the mushroom pie is the insider buying, which has me tasting potential opportunity; one for the watchlist, I’d posit. While we’ve looked at the quality of the earnings, we haven’t yet done any work to value the stock. So if you like to buy cheap, you may want to check if Bank of the James Financial Group is trading on a high P/E or a low P/E, relative to its industry.
The good news is that Bank of the James Financial Group is not the only growth stock with insider buying. Here’s a a list of them… with insider buying in the last three months!Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.