With EPS Growth And More, S&T Bancorp (NASDAQ:STBA) Makes An Interesting Case

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like S&T Bancorp (NASDAQ:STBA). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for S&T Bancorp

S&T Bancorp's Improving Profits

S&T Bancorp has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. To the delight of shareholders, S&T Bancorp's EPS soared from US$3.01 to US$3.86, over the last year. That's a fantastic gain of 28%.

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 S&T Bancorp's 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. While we note S&T Bancorp achieved similar EBIT margins to last year, revenue grew by a solid 14% to US$388m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of S&T Bancorp's forecast profits?

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. 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.

We note that S&T Bancorp insiders spent US$80k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic.

On top of the insider buying, it's good to see that S&T Bancorp insiders have a valuable investment in the business. Indeed, they hold US$17m worth of its stock. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 1.3%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, Chris McComish is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalisations between US$1.0b and US$3.2b, like S&T Bancorp, the median CEO pay is around US$5.0m.

S&T Bancorp's CEO took home a total compensation package worth US$2.5m in the year leading up 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 a culture of integrity, in a broader sense.

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.

The good news is that S&T Bancorp 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.