Is Now The Time To Put Cambridge Bancorp (NASDAQ:CATC) On Your Watchlist?

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 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Cambridge Bancorp (NASDAQ:CATC). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Cambridge Bancorp

How Quickly Is Cambridge Bancorp Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. We can see that in the last three years Cambridge Bancorp grew its EPS by 9.0% per year. That's a pretty good rate, if the company can sustain it.

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 Cambridge Bancorp'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. Cambridge Bancorp maintained stable EBIT margins over the last year, all while growing revenue 13% to US$175m. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Cambridge Bancorp's forecast profits?

Are Cambridge Bancorp Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We do note that Cambridge Bancorp insiders netted -US$10.0k worth of shares over the last year. On the other hand, Independent Director Cathleen Schmidt paid US$17k for shares, at a price of about US$85.00 per share. So, on balance, that's positive.

On top of the insider buying, it's good to see that Cambridge Bancorp insiders have a valuable investment in the business. To be specific, they have US$20m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 3.2% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. That's because on our analysis the CEO, Denis Sheahan, is paid less than the median for similar sized companies. For companies with market capitalizations between US$400m and US$1.6b, like Cambridge Bancorp, the median CEO pay is around US$3.0m.

Cambridge Bancorp offered total compensation worth US$2.0m to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. I'd also argue reasonable pay levels attest to good decision making more generally.

Should You Add Cambridge Bancorp To Your Watchlist?

As I already mentioned, Cambridge Bancorp is a growing business, which is what I like to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Cambridge Bancorp.

As a growth investor I do like to see insider buying. But Cambridge Bancorp 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. 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.