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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Investar Holding (NASDAQ:ISTR). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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 Investar Holding 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. It certainly is nice to see that Investar Holding 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.
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 Investar Holding's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Investar Holding maintained stable EBIT margins over the last year, all while growing revenue 25% to US$87m. 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.
While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Investar Holding?
Are Investar Holding 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.
Investar Holding insiders both bought and sold shares over the last twelve months, but they did end up spending US$42k more on stock than they received from selling it. When you weigh that up, it is a mild positive, indicating increased alignment between shareholders and management. Zooming in, we can see that the biggest insider purchase was by Independent Director Robert Jordan for US$50k worth of shares, at about US$21.50 per share.
On top of the insider buying, it's good to see that Investar Holding insiders have a valuable investment in the business. Indeed, they hold US$15m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 7.8% of the company; visible skin in the game.
Does Investar Holding Deserve A Spot On Your Watchlist?
For growth investors like me, Investar Holding's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So I do think this is one stock worth watching. It is worth noting though that we have found 1 warning sign for Investar Holding that you need to take into consideration.
The good news is that Investar Holding 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.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.