Does PB Bankshares (NASDAQ:PBBK) Deserve A Spot On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in PB Bankshares (NASDAQ:PBBK). 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.

See our latest analysis for PB Bankshares

PB Bankshares' Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Outstandingly, PB Bankshares' EPS shot from US$0.49 to US$1.05, over the last year. It's a rarity to see 115% year-on-year growth like that. The best case scenario? That the business has hit a true inflection point.

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. Our analysis has highlighted that PB Bankshares' revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. EBIT margins for PB Bankshares remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 32% to US$13m. That's encouraging news for the company!

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.

Since PB Bankshares is no giant, with a market capitalisation of US$34m, you should definitely check its cash and debt before getting too excited about its prospects.

Are PB Bankshares Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did PB Bankshares insiders refrain from selling stock during the year, but they also spent US$161k buying it. This is a good look for the company as it paints an optimistic picture for the future. We also note that it was the Chairman of the Board, Joseph Carroll, who made the biggest single acquisition, paying US$38k for shares at about US$12.66 each.

Should You Add PB Bankshares To Your Watchlist?

PB Bankshares' earnings have taken off in quite an impressive fashion. Growth investors should find it difficult to look past that strong EPS move. And indeed, it could be a sign that the business is at an inflection point. If that's the case, you may regret neglecting to put PB Bankshares on your watchlist. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for PB Bankshares that you should be aware of.

The good news is that PB Bankshares is not the only growth stock with insider buying. Here's a list of growth-focused companies in the US 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.