Stock Analysis

Should You Be Adding FFBW (NASDAQ:FFBW) To Your Watchlist Today?

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NasdaqCM:FFBW
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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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

So if you're like me, you might be more interested in profitable, growing companies, like FFBW (NASDAQ:FFBW). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for FFBW

FFBW's Improving Profits

Over the last three years, FFBW has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, FFBW's EPS shot from US$0.17 to US$0.31, over the last year. Year on year growth of 79% is certainly a sight to behold.

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. I note that FFBW's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. FFBW maintained stable EBIT margins over the last year, all while growing revenue 13% to US$10m. 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.

earnings-and-revenue-history
NasdaqCM:FFBW Earnings and Revenue History March 6th 2021

FFBW isn't a huge company, given its market capitalization of US$80m. That makes it extra important to check on its balance sheet strength.

Are FFBW Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.

We note that FFBW insiders spent US$65k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. It is also worth noting that it was Stephen Johnson who made the biggest single purchase, worth US$13k, paying US$8.46 per share.

It's reassuring that FFBW insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalizations under US$200m, like FFBW, the median CEO pay is around US$516k.

The FFBW CEO received US$332k in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. 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 a culture of integrity, in a broader sense.

Should You Add FFBW To Your Watchlist?

FFBW's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. Better yet, we can observe insider buying and the chief executive pay looks reasonable. It could be that FFBW is at an inflection point, given the EPS growth. For those chasing fast growth, then, I'd suggest to stock merits monitoring. However, before you get too excited we've discovered 1 warning sign for FFBW that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of FFBW, 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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What are the risks and opportunities for FFBW?

FFBW, Inc. operates as the holding company for First Federal Bank of Wisconsin that provides banking products and services in the United States.

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Rewards

  • Earnings grew by 1.6% over the past year

Risks

  • Does not have a meaningful market cap ($59M)

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