With EPS Growth And More, Cincinnati Bancorp (NASDAQ:CNNB) Is Interesting

By
Simply Wall St
Published
May 27, 2021
NasdaqCM:CNNB
Source: Shutterstock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Cincinnati Bancorp (NASDAQ:CNNB). 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.

See our latest analysis for Cincinnati Bancorp

How Fast Is Cincinnati Bancorp Growing Its Earnings Per Share?

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that Cincinnati Bancorp's EPS went from US$0.20 to US$1.70 in just one year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?

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 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 122% to US$19m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NasdaqCM:CNNB Earnings and Revenue History May 28th 2021

Since Cincinnati Bancorp is no giant, with a market capitalization of US$41m, so you should definitely check its cash and debt before getting too excited about its prospects.

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. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We note that Cincinnati Bancorp insiders spent US$57k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Executive Chairman of the Board & CEO, Robert Bedinghaus, who made the biggest single acquisition, paying US$14k for shares at about US$13.90 each.

It's reassuring that Cincinnati Bancorp insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. I refer to the very reasonable level of CEO pay. I discovered that the median total compensation for the CEOs of companies like Cincinnati Bancorp with market caps under US$200m is about US$527k.

The Cincinnati Bancorp CEO received US$264k in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Does Cincinnati Bancorp Deserve A Spot On Your Watchlist?

Cincinnati Bancorp's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. Better yet, we can observe insider buying and the chief executive pay looks reasonable. It could be that Cincinnati Bancorp is at an inflection point, given the EPS growth. If so, then it the potential for further gains probably merit a spot on your watchlist. You still need to take note of risks, for example - Cincinnati Bancorp has 1 warning sign we think you should be aware of.

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