Does OptimumBank Holdings (NASDAQ:OPHC) Deserve A Spot On Your Watchlist?

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 currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

In contrast to all that, many investors prefer to focus on companies like OptimumBank Holdings (NASDAQ:OPHC), 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 OptimumBank Holdings with the means to add long-term value to shareholders.

View our latest analysis for OptimumBank Holdings

OptimumBank Holdings' Improving Profits

OptimumBank Holdings has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, OptimumBank Holdings' EPS grew from US$0.60 to US$1.04, over the previous 12 months. It's not often a company can achieve year-on-year growth of 73%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

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 OptimumBank Holdings' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. OptimumBank Holdings maintained stable EBIT margins over the last year, all while growing revenue 72% to US$14m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Since OptimumBank Holdings is no giant, with a market capitalisation of US$27m, you should definitely check its cash and debt before getting too excited about its prospects.

Are OptimumBank Holdings Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. Our analysis has discovered that the median total compensation for the CEOs of companies like OptimumBank Holdings with market caps under US$200m is about US$748k.

The CEO of OptimumBank Holdings only received US$270k in total compensation for the year ending December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add OptimumBank Holdings To Your Watchlist?

OptimumBank Holdings' earnings per share have been soaring, with growth rates sky high. With increasing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. What's more, the fact that the CEO's compensation is quite reasonable is a sign that the company is conscious of excessive spending. It will definitely require further research to be sure, but it does seem that OptimumBank Holdings has the hallmarks of a quality business; and that would make it well worth watching. What about risks? Every company has them, and we've spotted 2 warning signs for OptimumBank Holdings you should know about.

Although OptimumBank Holdings certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.