Here's Why We Think Lakeland Bancorp (NASDAQ:LBAI) Is Well Worth Watching

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Lakeland Bancorp (NASDAQ:LBAI), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Lakeland Bancorp with the means to add long-term value to shareholders.

Check out our latest analysis for Lakeland Bancorp

How Quickly Is Lakeland Bancorp Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Lakeland Bancorp managed to grow EPS by 8.5% per year, over three years. That's a pretty good rate, if the company can sustain it.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of Lakeland Bancorp's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Lakeland Bancorp maintained stable EBIT margins over the last year, all while growing revenue 23% to US$336m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Lakeland Bancorp.

Are Lakeland Bancorp Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. 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.

Not only did Lakeland Bancorp insiders refrain from selling stock during the year, but they also spent US$101k buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. Zooming in, we can see that the biggest insider purchase was by company insider Brian Gragnolati for US$75k worth of shares, at about US$17.15 per share.

Along with the insider buying, another encouraging sign for Lakeland Bancorp is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at US$44m. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 4.9%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Tom Shara, is paid less than the median for similar sized companies. For companies with market capitalisations between US$400m and US$1.6b, like Lakeland Bancorp, the median CEO pay is around US$3.5m.

The Lakeland Bancorp CEO received US$3.1m in compensation for the year ending December 2022. That seems pretty reasonable, especially given it's 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.

Is Lakeland Bancorp Worth Keeping An Eye On?

As previously touched on, Lakeland Bancorp is a growing business, which is encouraging. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for your watchlist - and arguably a research priority. You still need to take note of risks, for example - Lakeland Bancorp has 1 warning sign we think you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Lakeland Bancorp 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. 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.