Stock Analysis

    With EPS Growth And More, Columbia Banking System (NASDAQ:COLB) Is Interesting

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

    So if you're like me, you might be more interested in profitable, growing companies, like Columbia Banking System (NASDAQ:COLB). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.

    View our latest analysis for Columbia Banking System

    How Quickly Is Columbia Banking System Increasing Earnings Per Share?

    If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Columbia Banking System managed to grow EPS by 13% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

    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 Columbia Banking System'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. Columbia Banking System maintained stable EBIT margins over the last year, all while growing revenue 16% to US$601m. That's progress.

    You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

    NasdaqGS:COLB Earnings and Revenue History September 27th 2021

    Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Columbia Banking System.

    Are Columbia Banking System Insiders Aligned With All Shareholders?

    Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. 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.

    Not only did Columbia Banking System insiders refrain from selling stock during the year, but they also spent US$73k buying it. That's nice to see, because it suggests insiders are optimistic.

    Along with the insider buying, another encouraging sign for Columbia Banking System is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$16m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.6% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

    While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Clint Stein, is paid less than the median for similar sized companies. I discovered that the median total compensation for the CEOs of companies like Columbia Banking System with market caps between US$2.0b and US$6.4b is about US$5.3m.

    The Columbia Banking System CEO received US$3.6m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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. It can also be a sign of good governance, more generally.

    Does Columbia Banking System Deserve A Spot On Your Watchlist?

    One important encouraging feature of Columbia Banking System is that it is growing profits. 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. What about risks? Every company has them, and we've spotted 1 warning sign for Columbia Banking System you should know about.

    As a growth investor I do like to see insider buying. But Columbia Banking System 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.

    Valuation is complex, but we're helping make it simple.

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