For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In contrast to all that, I prefer to spend time on companies like Landmark Bancorp (NASDAQ:LARK), 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. 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.
Landmark Bancorp's Improving Profits
In the last three years Landmark Bancorp's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, Landmark Bancorp's EPS shot from US$2.05 to US$3.60, over the last year. Year on year growth of 76% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that Landmark Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Landmark Bancorp maintained stable EBIT margins over the last year, all while growing revenue 30% to US$56m. 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.
Landmark Bancorp isn't a huge company, given its market capitalization of US$122m. That makes it extra important to check on its balance sheet strength.
Are Landmark Bancorp Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Landmark Bancorp insiders have a significant amount of capital invested in the stock. To be specific, they have US$27m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 23% of the company; visible skin in the game.
Does Landmark Bancorp Deserve A Spot On Your Watchlist?
Landmark Bancorp's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Landmark Bancorp for a spot on your watchlist. What about risks? Every company has them, and we've spotted 1 warning sign for Landmark Bancorp you should know about.
Although Landmark 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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