Is Now The Time To Put CF Bankshares (NASDAQ:CFBK) 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. 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 CF Bankshares (NASDAQ:CFBK). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for CF Bankshares

CF Bankshares's Improving Profits

Over the last three years, CF Bankshares has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, CF Bankshares's EPS shot from US$1.87 to US$3.98, over the last year. Year on year growth of 112% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that CF Bankshares's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. CF Bankshares maintained stable EBIT margins over the last year, all while growing revenue 132% to US$68m. 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.

CF Bankshares isn't a huge company, given its market capitalization of US$93m. That makes it extra important to check on its balance sheet strength.

Are CF Bankshares Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Not only did CF Bankshares insiders refrain from selling stock during the year, but they also spent US$100k buying it. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Independent Director, David Royer, who made the biggest single acquisition, paying US$74k for shares at about US$10.50 each.

Does CF Bankshares Deserve A Spot On Your Watchlist?

CF Bankshares's earnings per share have taken off like a rocket aimed right at the moon. If you're like me, you'll find it hard to ignore that sort of explosive EPS growth. And indeed, it could be a sign that the business is at an inflection point. For me, this situation certainly piques my interest. We don't want to rain on the parade too much, but we did also find 4 warning signs for CF Bankshares (2 are a bit concerning!) that you need to be mindful of.

As a growth investor I do like to see insider buying. But CF Bankshares 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. 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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