Here's Why We Think Sandy Spring Bancorp (NASDAQ:SASR) Is Well Worth Watching

By
Simply Wall St
Published
January 13, 2022
NasdaqGS:SASR
Source: Shutterstock

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Sandy Spring Bancorp (NASDAQ:SASR). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for Sandy Spring Bancorp

Sandy Spring Bancorp'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 Sandy Spring Bancorp has managed to grow EPS by 28% 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.

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. I note that Sandy Spring Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Sandy Spring Bancorp maintained stable EBIT margins over the last year, all while growing revenue 78% to US$582m. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NasdaqGS:SASR Earnings and Revenue History January 13th 2022

Fortunately, we've got access to analyst forecasts of Sandy Spring Bancorp's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Sandy Spring Bancorp Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Sandy Spring Bancorp insiders have a significant amount of capital invested in the stock. With a whopping US$66m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between US$1.0b and US$3.2b, like Sandy Spring Bancorp, the median CEO pay is around US$3.7m.

The Sandy Spring Bancorp CEO received US$2.4m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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 good governance, more generally.

Should You Add Sandy Spring Bancorp To Your Watchlist?

For growth investors like me, Sandy Spring Bancorp's raw rate of earnings growth is a beacon in the night. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. This may only be a fast rundown, but the takeaway for me is that Sandy Spring Bancorp is worth keeping an eye on. Still, you should learn about the 1 warning sign we've spotted with Sandy Spring Bancorp .

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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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