If You Like EPS Growth Then Check Out Cincinnati Bancorp (NASDAQ:CNNB) Before It's Too Late

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and 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.

In contrast to all that, I prefer to spend time on companies like Cincinnati Bancorp (NASDAQ:CNNB), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.

See our latest analysis for Cincinnati Bancorp

How Fast Is Cincinnati Bancorp Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That makes EPS growth an attractive quality for any company. I, for one, am blown away by the fact that Cincinnati Bancorp has grown EPS by 51% per year, over the last three years. Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

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 Cincinnati Bancorp'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 Cincinnati Bancorp's EBIT margins were flat over the last year, revenue grew by a solid 85% to US$16m. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

Cincinnati Bancorp isn't a huge company, given its market capitalization of US$36m. That makes it extra important to check on its balance sheet strength.

Are Cincinnati Bancorp Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. 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 Cincinnati Bancorp insiders refrain from selling stock during the year, but they also spent US$60k buying it. That puts the company in a nice light, as it makes me think its leaders are feeling confident. Zooming in, we can see that the biggest insider purchase was by Executive Chairman of the Board & CEO Robert Bedinghaus for US$18k worth of shares, at about US$8.83 per share.

Does Cincinnati Bancorp Deserve A Spot On Your Watchlist?

Cincinnati Bancorp's earnings have taken off like any random crypto-currency did, back in 2017. Growth investors should find it difficult to look past that strong EPS move. And in fact, it could well signal a fundamental shift in the business economics. If that's the case, you may regret neglecting to put Cincinnati Bancorp on your watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for Cincinnati Bancorp you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Cincinnati Bancorp, you'll probably love this free list of growing companies that insiders are buying.

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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