Here's Why We Think Northwest Bancshares (NASDAQ:NWBI) Is Well Worth Watching

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Northwest Bancshares (NASDAQ:NWBI). 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.

Check out our latest analysis for Northwest Bancshares

Northwest Bancshares's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. Over the last three years, Northwest Bancshares has grown EPS by 6.5% per year. While that sort of growth rate isn't amazing, it does show the business is growing.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Northwest Bancshares'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. While we note Northwest Bancshares's EBIT margins were flat over the last year, revenue grew by a solid 43% to US$559m. 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.

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 Northwest Bancshares?

Are Northwest Bancshares 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.

While Northwest Bancshares insiders did net -US$66k selling stock over the last year, they invested US$767k, a much higher figure. You could argue that level of buying implies genuine confidence in the business. It is also worth noting that it was Independent Director Timothy Hunter who made the biggest single purchase, worth US$139k, paying US$13.88 per share.

Along with the insider buying, another encouraging sign for Northwest Bancshares is that insiders, as a group, have a considerable shareholding. To be specific, they have US$19m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 1.2% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. The cherry on top is that the CEO, Ron Seiffert is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations between US$1.0b and US$3.2b, like Northwest Bancshares, the median CEO pay is around US$3.7m.

The CEO of Northwest Bancshares only received US$1.6m in total compensation for the year ending . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Is Northwest Bancshares Worth Keeping An Eye On?

As I already mentioned, Northwest Bancshares is a growing business, which is what I like to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Northwest Bancshares (1 doesn't sit too well with us) you should be aware of.

The good news is that Northwest Bancshares 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.

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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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