Should You Be Adding OptimumBank Holdings (NASDAQ:OPHC) To Your Watchlist Today?

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. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like OptimumBank Holdings (NASDAQ:OPHC). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for OptimumBank Holdings

OptimumBank Holdings' Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It is awe-striking that OptimumBank Holdings' EPS went from US$0.21 to US$1.21 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. 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. While we note OptimumBank Holdings achieved similar EBIT margins to last year, revenue grew by a solid 100% to US$13m. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

OptimumBank Holdings isn't a huge company, given its market capitalisation of US$25m. That makes it extra important to check on its balance sheet strength.

Are OptimumBank Holdings Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. The median total compensation for CEOs of companies similar in size to OptimumBank Holdings, with market caps under US$200m is around US$764k.

The CEO of OptimumBank Holdings only received US$270k in total compensation for the year ending December 2021. First impressions seem to indicate a compensation policy that is favourable to shareholders. 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 good governance, more generally.

Is OptimumBank Holdings Worth Keeping An Eye On?

OptimumBank Holdings' earnings per share have been soaring, with growth rates sky high. This appreciable increase in earnings could be a sign of an upward trajectory for the company. 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. Even so, be aware that OptimumBank Holdings is showing 2 warning signs in our investment analysis , you should know about...

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.