With EPS Growth And More, Stock Yards Bancorp (NASDAQ:SYBT) Makes An Interesting Case

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Stock Yards Bancorp (NASDAQ:SYBT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Stock Yards Bancorp with the means to add long-term value to shareholders.

View our latest analysis for Stock Yards Bancorp

Stock Yards Bancorp's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Stock Yards Bancorp managed to grow EPS by 13% per year, over three years. That's a good rate of growth, if it can be sustained.

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. Our analysis has highlighted that Stock Yards 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 Stock Yards Bancorp achieved similar EBIT margins to last year, revenue grew by a solid 20% to US$330m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. 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 Stock Yards Bancorp?

Are Stock Yards Bancorp Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own Stock Yards Bancorp shares worth a considerable sum. Given insiders own a significant chunk of shares, currently valued at US$99m, they have plenty of motivation to push the business to succeed. Amounting to 8.2% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. The median total compensation for CEOs of companies similar in size to Stock Yards Bancorp, with market caps between US$1.0b and US$3.2b, is around US$5.2m.

Stock Yards Bancorp's CEO took home a total compensation package of US$2.0m in the year prior to December 2022. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. 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.

Does Stock Yards Bancorp Deserve A Spot On Your Watchlist?

One important encouraging feature of Stock Yards Bancorp is that it is growing profits. The growth of EPS may be the eye-catching headline for Stock Yards Bancorp, but there's more to bring joy for shareholders. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. However, before you get too excited we've discovered 1 warning sign for Stock Yards Bancorp that you should be aware of.

Although Stock Yards Bancorp certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.