Here's Why We Think Blue Ridge Bankshares (NYSEMKT:BRBS) Is Well Worth Watching

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

So if you're like me, you might be more interested in profitable, growing companies, like Blue Ridge Bankshares (NYSEMKT:BRBS). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Blue Ridge Bankshares

How Fast Is Blue Ridge Bankshares 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). It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that Blue Ridge Bankshares has managed to grow EPS by 33% 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 smiling.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of Blue Ridge Bankshares'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 Blue Ridge Bankshares's EBIT margins were flat over the last year, revenue grew by a solid 102% to US$72m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Blue Ridge Bankshares isn't a huge company, given its market capitalization of US$103m. That makes it extra important to check on its balance sheet strength.

Are Blue Ridge Bankshares Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The good news is that Blue Ridge Bankshares insiders spent a whopping US$1.1m on stock in just one year, and I didn't see any selling. And so I find myself almost expectant, and certainly hopeful, that this large outlay signals prescient optimism for the business. We also note that it was the , Richard Spurzem, who made the biggest single acquisition, paying US$94k for shares at about US$20.15 each.

Along with the insider buying, another encouraging sign for Blue Ridge Bankshares is that insiders, as a group, have a considerable shareholding. To be specific, they have US$33m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 32% of the company; visible skin in the game.

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. That's because on our analysis the CEO, Brian Plum, is paid less than the median for similar sized companies. For companies with market capitalizations under US$200m, like Blue Ridge Bankshares, the median CEO pay is around US$553k.

Blue Ridge Bankshares offered total compensation worth US$373k to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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 Blue Ridge Bankshares Worth Keeping An Eye On?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Blue Ridge Bankshares's strong EPS growth. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. We should say that we've discovered 4 warning signs for Blue Ridge Bankshares (1 is a bit concerning!) that you should be aware of before investing here.

The good news is that Blue Ridge Bankshares 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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