We Ran A Stock Scan For Earnings Growth And Eastern Bankshares (NASDAQ:EBC) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Eastern Bankshares (NASDAQ:EBC), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Eastern Bankshares

How Fast Is Eastern Bankshares Growing Its Earnings Per Share?

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's easy to see why many investors focus in on EPS growth. Outstandingly, Eastern Bankshares' EPS shot from US$0.36 to US$0.95, over the last year. Year on year growth of 163% is certainly a sight to behold.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that Eastern Bankshares' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Eastern Bankshares maintained stable EBIT margins over the last year, all while growing revenue 12% to US$652m. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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

Are Eastern Bankshares Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Eastern Bankshares followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Given insiders own a significant chunk of shares, currently valued at US$51m, they have plenty of motivation to push the business to succeed. This would indicate that the goals of shareholders and management are one and the same.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Eastern Bankshares, with market caps between US$2.0b and US$6.4b, is around US$6.9m.

The Eastern Bankshares CEO received US$4.2m in compensation for the year ending December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, 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.

Should You Add Eastern Bankshares To Your Watchlist?

Eastern Bankshares' earnings per share have been soaring, with growth rates sky high. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Big growth can make big winners, so the writing on the wall tells us that Eastern Bankshares is worth considering carefully. It is worth noting though that we have found 2 warning signs for Eastern Bankshares that you need to take into consideration.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.