Do S&T Bancorp's (NASDAQ:STBA) Earnings Warrant Your Attention?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like S&T Bancorp (NASDAQ:STBA). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for S&T Bancorp

How Fast Is S&T Bancorp Growing Its Earnings Per Share?

In the last three years S&T Bancorp's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. S&T Bancorp's EPS shot up from US$3.01 to US$3.86; a result that's bound to keep shareholders happy. That's a fantastic gain of 28%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of S&T Bancorp's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note S&T Bancorp achieved similar EBIT margins to last year, revenue grew by a solid 14% to US$388m. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for S&T Bancorp?

Are S&T Bancorp Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did S&T Bancorp insiders refrain from selling stock during the year, but they also spent US$80k buying it. That's nice to see, because it suggests insiders are optimistic.

The good news, alongside the insider buying, for S&T Bancorp bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at US$13m. That's a lot of money, and no small incentive to work hard. Even though that's only about 1.3% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because S&T Bancorp's CEO, Chris McComish, is paid at a relatively modest level when compared to other CEOs for companies of this size. The median total compensation for CEOs of companies similar in size to S&T Bancorp, with market caps between US$400m and US$1.6b, is around US$3.6m.

S&T Bancorp offered total compensation worth US$2.5m to its CEO in the year to December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Is S&T Bancorp Worth Keeping An Eye On?

You can't deny that S&T Bancorp has grown its earnings per share at a very impressive rate. That's attractive. Furthermore, company insiders have been adding to their significant stake in the company. Astute investors will want to keep this stock on watch. We don't want to rain on the parade too much, but we did also find 1 warning sign for S&T Bancorp that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of S&T Bancorp, 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.

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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.