Do United Bankshares's (NASDAQ:UBSI) Earnings Warrant Your Attention?

By
Simply Wall St
Published
February 17, 2022
NasdaqGS:UBSI
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 United Bankshares (NASDAQ:UBSI). 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. 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.

View our latest analysis for United Bankshares

United Bankshares's Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. It's good to see that United Bankshares's EPS have grown from US$2.40 to US$2.70 over twelve months. I doubt many would complain about that 13% gain.

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). I note that United Bankshares's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note United Bankshares's EBIT margins were flat over the last year, revenue grew by a solid 13% to US$1.1b. That's a real positive.

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:UBSI Earnings and Revenue History February 17th 2022

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

Are United Bankshares Insiders Aligned With All Shareholders?

Since United Bankshares has a market capitalization of US$5.1b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. With a whopping US$99m 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's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between US$4.0b and US$12b, like United Bankshares, the median CEO pay is around US$6.3m.

The United Bankshares CEO received US$4.3m 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.

Is United Bankshares Worth Keeping An Eye On?

One important encouraging feature of United Bankshares is that it is growing profits. Earnings growth might be the main game for United Bankshares, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. You should always think about risks though. Case in point, we've spotted 2 warning signs for United Bankshares you should be aware of, and 1 of them shouldn't be ignored.

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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