If You Like EPS Growth Then Check Out LCNB (NASDAQ:LCNB) Before It's Too Late

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 LCNB (NASDAQ:LCNB), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

See our latest analysis for LCNB

How Fast Is LCNB Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Over the last three years, LCNB has grown EPS by 6.2% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. Not all of LCNB'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. LCNB maintained stable EBIT margins over the last year, all while growing revenue 5.2% to US$70m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

LCNB isn't a huge company, given its market capitalization of US$242m. That makes it extra important to check on its balance sheet strength.

Are LCNB 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. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

LCNB insiders both bought and sold shares over the last twelve months, but they did end up spending US$6.6k more on stock than they received from selling it. So, on balance, the insider transactions are mildly encouraging. We also note that it was the Independent Director, Mary Bradford, who made the biggest single acquisition, paying US$26k for shares at about US$14.62 each.

On top of the insider buying, it's good to see that LCNB insiders have a valuable investment in the business. To be specific, they have US$17m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 6.9% of the company, demonstrating a degree of high-level alignment with shareholders.

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. That's because on our analysis the CEO, Eric Meilstrup, is paid less than the median for similar sized companies. For companies with market capitalizations between US$100m and US$400m, like LCNB, the median CEO pay is around US$893k.

LCNB offered total compensation worth US$772k to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add LCNB To Your Watchlist?

One important encouraging feature of LCNB is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. We should say that we've discovered 2 warning signs for LCNB (1 can't be ignored!) that you should be aware of before investing here.

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

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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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