Does Home Federal Bancorp of Louisiana (NASDAQ:HFBL) Deserve A Spot On Your Watchlist?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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.

In contrast to all that, I prefer to spend time on companies like Home Federal Bancorp of Louisiana (NASDAQ:HFBL), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Home Federal Bancorp of Louisiana

Home Federal Bancorp of Louisiana's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Home Federal Bancorp of Louisiana has managed to grow EPS by 19% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. Not all of Home Federal Bancorp of Louisiana's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note Home Federal Bancorp of Louisiana's EBIT margins were flat over the last year, revenue grew by a solid 19% to US$20m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Home Federal Bancorp of Louisiana isn't a huge company, given its market capitalization of US$62m. That makes it extra important to check on its balance sheet strength.

Are Home Federal Bancorp of Louisiana Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We do note that Home Federal Bancorp of Louisiana insiders netted -US$17k worth of shares over the last year. On the other hand, Independent Director Scott Lawrence paid US$37k for shares, at a price of about US$15.62 per share. So, on balance, that's positive.

Along with the insider buying, another encouraging sign for Home Federal Bancorp of Louisiana is that insiders, as a group, have a considerable shareholding. To be specific, they have US$17m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 27% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add Home Federal Bancorp of Louisiana To Your Watchlist?

You can't deny that Home Federal Bancorp of Louisiana has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. So I do think this is one stock worth watching. It is worth noting though that we have found 2 warning signs for Home Federal Bancorp of Louisiana that you need to take into consideration.

As a growth investor I do like to see insider buying. But Home Federal Bancorp of Louisiana isn't the only one. You can see a a free list of them here.

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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