I Ran A Stock Scan For Earnings Growth And Professional Holding (NASDAQ:PFHD) Passed With Ease

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like Professional Holding (NASDAQ:PFHD). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for Professional Holding

Professional Holding's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Professional Holding has managed to grow EPS by 21% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Not all of Professional Holding'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 Professional Holding's EBIT margins were flat over the last year, revenue grew by a solid 81% to US$54m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

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 Professional Holding EPS 100% free.

Are Professional Holding Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

While Professional Holding insiders did net -US$5.4k selling stock over the last year, they invested US$377k, a much higher figure. You could argue that level of buying implies genuine confidence in the business. Zooming in, we can see that the biggest insider purchase was by Independent Director Rolando DiGasbarro for US$215k worth of shares, at about US$10.75 per share.

Does Professional Holding Deserve A Spot On Your Watchlist?

You can't deny that Professional Holding has grown its earnings per share at a very impressive rate. That's attractive. The growth rate whets my appetite for research, and the insider buying only increases my interest in the stock. So on this analysis I believe Professional Holding is probably worth spending some time on. Before you take the next step you should know about the 2 warning signs for Professional Holding that we have uncovered.

The good news is that Professional Holding 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. 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.
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