Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Orrstown Financial Services (NASDAQ:ORRF). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Orrstown Financial Services’s Earnings Per Share Are Growing.
As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Orrstown Financial Services grew its EPS by 13% per year. That’s a good rate of growth, if it can be sustained.
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. Not all of Orrstown Financial Services’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 Orrstown Financial Services’s EBIT margins were flat over the last year, revenue grew by a solid 14% to US$75m. That’s progress.
The chart below shows how the company’s bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Orrstown Financial Services EPS 100% free.
Are Orrstown Financial Services Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That’s because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don’t always get it right.
Over the last 12 months Orrstown Financial Services insiders spent US$58k more buying shares than they received from selling them. Although I don’t particularly like to see selling, the fact that they put more capital in, than they extracted, is a positive in my mind. We also note that it was the Director, Floyd Stoner, who made the biggest single acquisition, paying US$27k for shares at about US$20.61 each.
Does Orrstown Financial Services Deserve A Spot On Your Watchlist?
As I already mentioned, Orrstown Financial Services is a growing business, which is what I like to see. Not every business can grow its EPS, but Orrstown Financial Services certainly can. The cherry on top is the insider share purchases, which provide an extra impetus to keep and eye on this stock, at the very least. Of course, just because Orrstown Financial Services is growing does not mean it is undervalued. If you’re wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Orrstown Financial Services, 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
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.