With EPS Growth And More, Bank of N.T. Butterfield & Son (NYSE:NTB) Makes An Interesting Case

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Bank of N.T. Butterfield & Son (NYSE:NTB). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Bank of N.T. Butterfield & Son with the means to add long-term value to shareholders.

See our latest analysis for Bank of N.T. Butterfield & Son

How Fast Is Bank of N.T. Butterfield & Son Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Bank of N.T. Butterfield & Son has managed to grow EPS by 18% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming. It's also worth noting that the EPS growth has been assisted by share buybacks, indicating the company is in a position to return capital to shareholders.

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. Our analysis has highlighted that Bank of N.T. Butterfield & Son's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Bank of N.T. Butterfield & Son maintained stable EBIT margins over the last year, all while growing revenue 5.3% to US$579m. That's progress.

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.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Bank of N.T. Butterfield & Son's future profits.

Are Bank of N.T. Butterfield & Son Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own Bank of N.T. Butterfield & Son shares worth a considerable sum. To be specific, they have US$17m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 1.2% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is Bank of N.T. Butterfield & Son Worth Keeping An Eye On?

You can't deny that Bank of N.T. Butterfield & Son has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. You still need to take note of risks, for example - Bank of N.T. Butterfield & Son has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by recent insider purchases.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.