Stock Analysis

Do Popular's (NASDAQ:BPOP) Earnings Warrant Your Attention?

  •  Updated
NasdaqGS:BPOP
Source: Shutterstock

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. 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.

So if you're like me, you might be more interested in profitable, growing companies, like Popular (NASDAQ:BPOP). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Popular

How Fast Is Popular Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. I, for one, am blown away by the fact that Popular has grown EPS by 54% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

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). I note that Popular's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Popular's EBIT margins were flat over the last year, revenue grew by a solid 23% to US$2.5b. 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.

earnings-and-revenue-history
NasdaqGS:BPOP Earnings and Revenue History October 9th 2021

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Popular.

Are Popular Insiders Aligned With All Shareholders?

Since Popular has a market capitalization of US$6.6b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$106m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between US$4.0b and US$12b, like Popular, the median CEO pay is around US$6.4m.

The Popular CEO received US$4.8m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Popular Deserve A Spot On Your Watchlist?

Popular's earnings per share have taken off like a rocket aimed right at the moon. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The sharp increase in earnings could signal good business momentum. Big growth can make big winners, so I do think Popular is worth considering carefully. It is worth noting though that we have found 3 warning signs for Popular (1 is a bit unpleasant!) that you need to take into consideration.

Although Popular certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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

What are the risks and opportunities for Popular?

Popular, Inc., through its subsidiaries, provides various retail, mortgage, and commercial banking products and services in Puerto Rico, the United States, and British Virgin Islands.

View Full Analysis

Rewards

  • Trading at 60.9% below our estimate of its fair value

  • Earnings grew by 18% over the past year

Risks

  • Earnings are forecast to decline by an average of 25% per year for the next 3 years

View all Risks and Rewards

Share Price

Market Cap

1Y Return

View Company Report