Northwest Bancshares (NASDAQ:NWBI) Ticks All The Boxes When It Comes To Earnings Growth

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. 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.

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 Northwest Bancshares (NASDAQ:NWBI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Northwest Bancshares with the means to add long-term value to shareholders.

Check out our latest analysis for Northwest Bancshares

Northwest Bancshares' Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Northwest Bancshares has grown EPS by 25% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. It's noted that Northwest Bancshares' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Northwest Bancshares maintained stable EBIT margins over the last year, all while growing revenue 6.3% to US$534m. That's a real positive.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Northwest Bancshares' future EPS 100% free.

Are Northwest Bancshares Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.

While Northwest Bancshares insiders did net US$74k selling stock over the last year, they invested US$423k, a much higher figure. This overall confidence in the company at current the valuation signals their optimism. It is also worth noting that it was Independent Director Timothy Hunter who made the biggest single purchase, worth US$160k, paying US$10.67 per share.

Along with the insider buying, another encouraging sign for Northwest Bancshares is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$16m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 1.0% 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 big picture. That's because on our analysis the CEO, Louis Torchio, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to Northwest Bancshares, with market caps between US$1.0b and US$3.2b, is around US$5.1m.

The Northwest Bancshares CEO received total compensation of just US$1.2m in the year to December 2022. First impressions seem to indicate a compensation policy that is favourable to 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. It can also be a sign of good governance, more generally.

Is Northwest Bancshares Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Northwest Bancshares' strong EPS growth. Furthermore, company insiders have been adding to their significant stake in the company. These things considered, this is one stock worth watching. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Northwest Bancshares (1 can't be ignored) 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. 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.