Here's Why I Think United Community Banks (NASDAQ:UCBI) Is An Interesting Stock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in United Community Banks (NASDAQ:UCBI). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for United Community Banks

How Quickly Is United Community Banks Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years United Community Banks grew its EPS by 6.0% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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 United Community Banks's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. United Community Banks maintained stable EBIT margins over the last year, all while growing revenue 29% to US$744m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for United Community Banks.

Are United Community Banks Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

While United Community Banks insiders did net -US$192k selling stock over the last year, they invested US$393k, a much higher figure. You could argue that level of buying implies genuine confidence in the business. Zooming in, we can see that the biggest insider purchase was by Executive VP & Chief Risk Officer Robert Edwards for US$300k worth of shares, at about US$30.30 per share.

Along with the insider buying, another encouraging sign for United Community Banks is that insiders, as a group, have a considerable shareholding. To be specific, they have US$21m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.6% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Herbert Harton, is paid less than the median for similar sized companies. I discovered that the median total compensation for the CEOs of companies like United Community Banks with market caps between US$2.0b and US$6.4b is about US$5.6m.

United Community Banks offered total compensation worth US$3.4m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. While the level of CEO compensation isn't a huge factor in my view of the company, 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.

Does United Community Banks Deserve A Spot On Your Watchlist?

One positive for United Community Banks is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist - and arguably a research priority. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with United Community Banks , and understanding these should be part of your investment process.

The good news is that United Community Banks is not the only growth stock with insider buying. Here's a list of them... 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.