Does Brookline Bancorp (NASDAQ:BRKL) Deserve A Spot On Your Watchlist?

By
Simply Wall St
Published
January 21, 2022
NasdaqGS:BRKL
Source: Shutterstock

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like Brookline Bancorp (NASDAQ:BRKL), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Brookline Bancorp

How Quickly Is Brookline Bancorp Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Brookline Bancorp has grown EPS by 19% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. I note that Brookline Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Brookline Bancorp maintained stable EBIT margins over the last year, all while growing revenue 43% to US$310m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NasdaqGS:BRKL Earnings and Revenue History January 21st 2022

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Brookline Bancorp?

Are Brookline Bancorp Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Brookline Bancorp insiders have a significant amount of capital invested in the stock. Indeed, they hold US$36m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 2.8% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between US$1.0b and US$3.2b, like Brookline Bancorp, the median CEO pay is around US$3.7m.

Brookline Bancorp offered total compensation worth US$2.3m to its CEO in the year to . 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. I'd also argue reasonable pay levels attest to good decision making more generally.

Should You Add Brookline Bancorp To Your Watchlist?

For growth investors like me, Brookline Bancorp's raw rate of earnings growth is a beacon in the night. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. This may only be a fast rundown, but the takeaway for me is that Brookline Bancorp is worth keeping an eye on. What about risks? Every company has them, and we've spotted 2 warning signs for Brookline Bancorp (of which 1 is significant!) you should know about.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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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