With EPS Growth And More, Fidelity D & D Bancorp (NASDAQ:FDBC) Is Interesting

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

In contrast to all that, I prefer to spend time on companies like Fidelity D & D Bancorp (NASDAQ:FDBC), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Fidelity D & D Bancorp

Fidelity D & D Bancorp's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Fidelity D & D Bancorp grew its EPS by 9.8% per year. That growth rate is fairly good, assuming the company can keep it up.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that Fidelity D & D 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 Fidelity D & D Bancorp's EBIT margins were flat over the last year, revenue grew by a solid 49% to US$61m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since Fidelity D & D Bancorp is no giant, with a market capitalization of US$285m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Fidelity D & D Bancorp Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Fidelity D & D Bancorp insiders have a significant amount of capital invested in the stock. Given insiders own a small fortune of shares, currently valued at US$59m, they have plenty of motivation to push the business to succeed. At 21% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like Fidelity D & D Bancorp with market caps between US$100m and US$400m is about US$994k.

The Fidelity D & D Bancorp CEO received US$829k in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.

Is Fidelity D & D Bancorp Worth Keeping An Eye On?

One positive for Fidelity D & D Bancorp is that it is growing EPS. That's nice to see. The fact that EPS is growing is a genuine positive for Fidelity D & D Bancorp, but the pretty picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. However, before you get too excited we've discovered 1 warning sign for Fidelity D & D Bancorp that you should be aware of.

Although Fidelity D & D Bancorp certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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. 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.
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