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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Home Bancshares (Conway AR) (NYSE:HOMB). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Home Bancshares (Conway AR) with the means to add long-term value to shareholders.
How Quickly Is Home Bancshares (Conway AR) Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Impressively, Home Bancshares (Conway AR) has grown EPS by 19% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that Home Bancshares (Conway AR)'s revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Home Bancshares (Conway AR) achieved similar EBIT margins to last year, revenue grew by a solid 31% to US$1.0b. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of Home Bancshares (Conway AR)'s future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Home Bancshares (Conway AR) Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Home Bancshares (Conway AR) insiders have a significant amount of capital invested in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$319m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.
It's good to see that insiders are invested in the company, but are remuneration levels 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 Home Bancshares (Conway AR), with market caps between US$2.0b and US$6.4b, is around US$6.6m.
The Home Bancshares (Conway AR) CEO received US$5.7m in compensation for the year ending December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Should You Add Home Bancshares (Conway AR) To Your Watchlist?
For growth investors, Home Bancshares (Conway AR)'s raw rate of earnings growth is a beacon in the night. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Everyone has their own preferences when it comes to investing but it definitely makes Home Bancshares (Conway AR) look rather interesting indeed. However, before you get too excited we've discovered 1 warning sign for Home Bancshares (Conway AR) that you should be aware of.
The beauty of investing is that you can invest in almost 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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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.
Home Bancshares (Conway AR)
Home Bancshares, Inc. (Conway, AR) operates as the bank holding company for Centennial Bank that provides commercial and retail banking, and related financial services to businesses, real estate developers and investors, individuals, and municipalities.
Flawless balance sheet with solid track record and pays a dividend.