Here's Why Banco Latinoamericano de Comercio Exterior S. A (NYSE:BLX) Has Caught The Eye Of Investors

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Banco Latinoamericano de Comercio Exterior S. A (NYSE:BLX). 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.

Check out our latest analysis for Banco Latinoamericano de Comercio Exterior S. A

How Fast Is Banco Latinoamericano de Comercio Exterior S. A 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) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, Banco Latinoamericano de Comercio Exterior S. A has achieved impressive annual EPS growth of 54%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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 Banco Latinoamericano de Comercio Exterior S. A's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Banco Latinoamericano de Comercio Exterior S. A remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 39% to US$271m. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Banco Latinoamericano de Comercio Exterior S. A's balance sheet strength, before getting too excited.

Are Banco Latinoamericano de Comercio Exterior S. A 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 Banco Latinoamericano de Comercio Exterior S. A shares worth a considerable sum. As a matter of fact, their holding is valued at US$33m. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 2.9%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Is Banco Latinoamericano de Comercio Exterior S. A Worth Keeping An Eye On?

Banco Latinoamericano de Comercio Exterior S. A's earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Banco Latinoamericano de Comercio Exterior S. A very closely. However, before you get too excited we've discovered 1 warning sign for Banco Latinoamericano de Comercio Exterior S. A that you should be aware of.

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 significant insider holdings.

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.