Do Hawthorn Bancshares's (NASDAQ:HWBK) Earnings Warrant Your Attention?

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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Hawthorn Bancshares (NASDAQ:HWBK). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Hawthorn Bancshares

Hawthorn Bancshares's Improving Profits

Over the last three years, Hawthorn Bancshares 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. As a result, I'll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, Hawthorn Bancshares's EPS soared from US$1.89 to US$3.01, in just one year. That's a commendable gain of 59%.

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 Hawthorn Bancshares'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 Hawthorn Bancshares's EBIT margins were flat over the last year, revenue grew by a solid 28% to US$70m. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

Hawthorn Bancshares isn't a huge company, given its market capitalization of US$143m. That makes it extra important to check on its balance sheet strength.

Are Hawthorn Bancshares Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did Hawthorn Bancshares insiders refrain from selling stock during the year, but they also spent US$187k buying it. That puts the company in a nice light, as it makes me think its leaders are feeling confident. It is also worth noting that it was Independent Director Philip Freeman who made the biggest single purchase, worth US$56k, paying US$15.38 per share.

Is Hawthorn Bancshares Worth Keeping An Eye On?

You can't deny that Hawthorn Bancshares has grown its earnings per share at a very impressive rate. That's attractive. The growth rate whets my appetite for research, and the insider buying only increases my interest in the stock. To put it succinctly; Hawthorn Bancshares is a strong candidate for your watchlist. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Hawthorn Bancshares.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Hawthorn Bancshares, 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.

If you decide to trade Hawthorn Bancshares, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.