Stock Analysis

Do Byline Bancorp's (NYSE:BY) Earnings Warrant Your Attention?

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NYSE:BY
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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Byline Bancorp (NYSE:BY). 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. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Byline Bancorp

Byline 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). That means EPS growth is considered a real positive by most successful long-term investors. I, for one, am blown away by the fact that Byline Bancorp has grown EPS by 57% per year, over the last three years. Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

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. I note that Byline Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Byline Bancorp reported flat revenue and EBIT margins over the last year. That's not a major concern but nor does it point to the long term growth we like to see.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:BY Earnings and Revenue History June 5th 2021

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Byline Bancorp?

Are Byline Bancorp Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So we're pleased to report that Byline Bancorp insiders own a meaningful share of the business. Actually, with 39% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. And their holding is extremely valuable at the current share price, totalling US$336m. That means they have plenty of their own capital riding on the performance of the business!

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$400m and US$1.6b, like Byline Bancorp, the median CEO pay is around US$2.4m.

The CEO of Byline Bancorp only received US$816k in total compensation for the year ending . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. 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. I'd also argue reasonable pay levels attest to good decision making more generally.

Is Byline Bancorp Worth Keeping An Eye On?

Byline Bancorp's earnings per share have taken off like a rocket aimed right at the moon. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The strong EPS improvement suggests the businesses is humming along. Byline Bancorp certainly ticks a few of my boxes, so I think it's probably well worth further consideration. We don't want to rain on the parade too much, but we did also find 2 warning signs for Byline Bancorp (1 makes us a bit uncomfortable!) that you need to be mindful of.

Although Byline Bancorp certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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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What are the risks and opportunities for Byline Bancorp?

Byline Bancorp, Inc. operates as the bank holding company for Byline Bank that provides various banking products and services for small and medium sized businesses, commercial real estate and financial sponsors, and consumers in the United States.

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Rewards

  • Trading at 40.2% below our estimate of its fair value

  • Earnings are forecast to grow 12.2% per year

Risks

No risks detected for BY from our risks checks.

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