Should You Be Adding OFG Bancorp (NYSE:OFG) To Your Watchlist Today?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in OFG Bancorp (NYSE:OFG). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for OFG Bancorp

How Fast Is OFG Bancorp Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that OFG Bancorp has managed to grow EPS by 28% per year over 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 OFG Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. OFG Bancorp maintained stable EBIT margins over the last year, all while growing revenue 3.8% to US$633m. 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.

Fortunately, we've got access to analyst forecasts of OFG Bancorp's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are OFG Bancorp 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 OFG Bancorp insiders have a significant amount of capital invested in the stock. To be specific, they have US$33m worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 1.9% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations between US$1.0b and US$3.2b, like OFG Bancorp, the median CEO pay is around US$5.6m.

OFG Bancorp's CEO took home a total compensation package worth US$3.5m in the year leading up to December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is OFG Bancorp Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into OFG Bancorp's strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. The overarching message here is that OFG Bancorp has underlying strengths that make it worth a look at. You should always think about risks though. Case in point, we've spotted 3 warning signs for OFG Bancorp you should be aware of, and 1 of them is a bit unpleasant.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

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.

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