Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
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. 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.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Riverview Bancorp (NASDAQ:RVSB). 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. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
Riverview Bancorp’s Earnings Per Share Are Growing.
As one of my mentors once told me, share price follows earnings per share (EPS). It’s no surprise, then, that I like to invest in companies with EPS growth. Who among us would not applaud Riverview Bancorp’s stratospheric annual EPS growth of 39%, compound, over the last three years? While that sort of growth rate isn’t sustainable for long, it certainly catches my attention; like a glint in the eye of my lover.
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 Riverview Bancorp’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 Riverview Bancorp’s EBIT margins were flat over the last year, revenue grew by a solid 8.3% to US$58m. That’s a real positive.
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.
Riverview Bancorp isn’t a huge company, given its market capitalization of US$185m. That makes it extra important to check on its balance sheet strength.
Are Riverview Bancorp 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.
Any way you look at it Riverview Bancorp shareholders can gain quiet confidence from the fact that insiders shelled out US$295k to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. Zooming in, we can see that the biggest insider purchase was by Director Patricia Eby for US$124k worth of shares, at about US$7.72 per share.
On top of the insider buying, it’s good to see that Riverview Bancorp insiders have a valuable investment in the business. To be specific, they have US$13m worth of shares. That’s a lot of money, and no small incentive to work hard. Those holdings account for over 6.9% of the company; visible skin in the game.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That’s because on our analysis the CEO, Kevin Lycklama, is paid less than the median for similar sized companies. I discovered that the median total compensation for the CEOs of companies like Riverview Bancorp with market caps between US$100m and US$400m is about US$1.1m.
The Riverview Bancorp CEO received US$702k in compensation for the year ending March 2019. That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me 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.
Does Riverview Bancorp Deserve A Spot On Your Watchlist?
Riverview Bancorp’s earnings per share growth has been so hot recently that thinking about it is making me blush. The company can also boast of insider buying, and reasonable remuneration for the CEO. The strong EPS growth suggests Riverview Bancorp may be at an inflection point. For those chasing fast growth, then, I’d suggest to stock merits monitoring. While we’ve looked at the quality of the earnings, we haven’t yet done any work to value the stock. So if you like to buy cheap, you may want to check if Riverview Bancorp is trading on a high P/E or a low P/E, relative to its industry.
The good news is that Riverview Bancorp is not the only growth stock with insider buying. Here’s a 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
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 email@example.com. 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.