It’s only natural that many investors, especially those who are new to the game, prefer to buy shares in ‘sexy’ stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?’ Leuz et. al. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.
In contrast to all that, I prefer to spend time on companies like Fauquier Bankshares (NASDAQ:FBSS), which has not only revenues, but also profits. 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.
How Quickly Is Fauquier Bankshares Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It’s no surprise, then, that I like to invest in companies with EPS growth. Who among us would not applaud Fauquier Bankshares’s stratospheric annual EPS growth of 50%, compound, over the last three years? While that sort of growth rate isn’t sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. I note that Fauquier Bankshares’s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Fauquier Bankshares maintained stable EBIT margins over the last year, all while growing revenue 2.9% to US$29m. That’s progress.
Fauquier Bankshares isn’t a huge company, given its market capitalization of US$78m. That makes it extra important to check on its balance sheet strength.
Are Fauquier Bankshares 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.
In the last twelve months Fauquier Bankshares insiders spent US$41k on stock; good news for shareholders. This might not be a huge sum, but it’s well worth noting anyway, given the complete lack of selling. We also note that it was the Director, Kevin Carter, who made the biggest single acquisition, paying US$35k for shares at about US$21.61 each.
Does Fauquier Bankshares Deserve A Spot On Your Watchlist?
Fauquier Bankshares’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 Fauquier Bankshares on your watchlist. Now, you could try to make up your mind on Fauquier Bankshares by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
The good news is that Fauquier Bankshares is not the only growth stock with insider buying. Here’s a list of them… 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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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.