Stock Analysis

Here's Why We Think Mid-Southern Bancorp (NASDAQ:MSVB) Is Well Worth Watching

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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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Mid-Southern Bancorp (NASDAQ:MSVB). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Mid-Southern Bancorp

How Fast Is Mid-Southern Bancorp Growing?

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. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Mid-Southern Bancorp has grown EPS by 32% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Our analysis has highlighted that Mid-Southern Bancorp's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. EBIT margins for Mid-Southern Bancorp remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.5% to US$8.8m. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

NasdaqCM:MSVB Earnings and Revenue History March 15th 2023

Since Mid-Southern Bancorp is no giant, with a market capitalisation of US$37m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Mid-Southern 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But more importantly, Independent Director Eric Koch spent US$84k acquiring shares, doing so at an average price of US$13.92. Strong buying like that could be a sign of opportunity.

It's reassuring that Mid-Southern Bancorp insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalisations under US$200m, like Mid-Southern Bancorp, the median CEO pay is around US$753k.

The Mid-Southern Bancorp CEO received total compensation of just US$243k in the year to December 2021. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Mid-Southern Bancorp Worth Keeping An Eye On?

For growth investors, Mid-Southern Bancorp's raw rate of earnings growth is a beacon in the night. But wait, it gets better. We have seen insider buying and the executive pay seems on the modest side of things. The overriding message from this quick rundown is yes, this stock is worth investigating further. Even so, be aware that Mid-Southern Bancorp is showing 2 warning signs in our investment analysis , you should know about...

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

What are the risks and opportunities for Mid-Southern Bancorp?

Mid-Southern Bancorp, Inc. operates as the holding company for Mid-Southern Savings Bank, FSB that provides various banking products and services to individuals and business customers.

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  • Earnings grew by 17% over the past year


  • Does not have a meaningful market cap ($32M)

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