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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
So if you're like me, you might be more interested in profitable, growing companies, like Village Bank and Trust Financial (NASDAQ:VBFC). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
How Fast Is Village Bank and Trust Financial Growing Its Earnings Per Share?
Over the last three years, Village Bank and Trust Financial has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, Village Bank and Trust Financial's EPS shot from US$3.10 to US$5.86, over the last year. You don't see 89% year-on-year growth like that, very often.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Village Bank and Trust Financial'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. While we note Village Bank and Trust Financial's EBIT margins were flat over the last year, revenue grew by a solid 23% to US$32m. 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.
Since Village Bank and Trust Financial is no giant, with a market capitalization of US$56m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Village Bank and Trust Financial 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. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
It's good to see Village Bank and Trust Financial insiders walking the walk, by spending US$575k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. Zooming in, we can see that the biggest insider purchase was by Kenneth Lehman for US$216k worth of shares, at about US$28.80 per share.
And the insider buying isn't the only sign of alignment between shareholders and the board, since Village Bank and Trust Financial insiders own more than a third of the company. In fact, they own 62% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. In terms of absolute value, insiders have US$35m invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!
Does Village Bank and Trust Financial Deserve A Spot On Your Watchlist?
Village Bank and Trust Financial's earnings per share have taken off like a rocket aimed right at the moon. What's more insiders own a significant stake in the company and have been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest Village Bank and Trust Financial belongs on the top of your watchlist. It is worth noting though that we have found 2 warning signs for Village Bank and Trust Financial (1 is a bit unpleasant!) that you need to take into consideration.
The good news is that Village Bank and Trust Financial 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. 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.
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