Do East West Bancorp's (NASDAQ:EWBC) Earnings Warrant Your Attention?

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 currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like East West Bancorp (NASDAQ:EWBC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide East West Bancorp with the means to add long-term value to shareholders.

Check out our latest analysis for East West Bancorp

How Quickly Is East West Bancorp Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that East West Bancorp has managed to grow EPS by 29% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. Not all of East West Bancorp's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. East West Bancorp maintained stable EBIT margins over the last year, all while growing revenue 24% to US$2.4b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

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

Are East West Bancorp Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, 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.

The US$651k worth of shares that insiders sold during the last 12 months pales in comparison to the US$2.1m they spent on acquiring shares in the company. This bodes well for East West Bancorp as it highlights the fact that those who are important to the company having a lot of faith in its future. Zooming in, we can see that the biggest insider purchase was by Chairman Dominic Ng for US$501k worth of shares, at about US$42.62 per share.

On top of the insider buying, it's good to see that East West Bancorp insiders have a valuable investment in the business. Holding US$69m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This should keep them focused on creating long term value for shareholders.

Does East West Bancorp Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into East West Bancorp's strong EPS growth. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. It is worth noting though that we have found 1 warning sign for East West Bancorp that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of East West 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. 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.