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.
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 Southern Missouri Bancorp (NASDAQ:SMBC). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
How Quickly Is Southern Missouri Bancorp Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Impressively, Southern Missouri Bancorp has grown EPS by 20% 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. Not all of Southern Missouri Bancorp's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note Southern Missouri Bancorp achieved similar EBIT margins to last year, revenue grew by a solid 14% to US$121m. That's encouraging news for the company!
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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Southern Missouri Bancorp's future EPS 100% free.
Are Southern Missouri Bancorp Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, 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.
Despite some Southern Missouri Bancorp insiders disposing of some shares, we note that there was US$149k more in buying interest among those who know the company best Although some people may hesitate due to the share sales, the fact that insiders bought more than they sold, is a positive thing to note. Zooming in, we can see that the biggest insider purchase was by Independent Director David Tooley for US$191k worth of shares, at about US$42.38 per share.
Along with the insider buying, another encouraging sign for Southern Missouri Bancorp is that insiders, as a group, have a considerable shareholding. With a whopping US$84m worth of shares as a group, insiders have plenty riding on the company's success. Amounting to 17% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Greg Steffens, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to Southern Missouri Bancorp, with market caps between US$200m and US$800m, is around US$2.6m.
The Southern Missouri Bancorp CEO received total compensation of just US$596k in the year to June 2021. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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. It can also be a sign of good governance, more generally.
Is Southern Missouri Bancorp Worth Keeping An Eye On?
If you believe that share price follows earnings per share you should definitely be delving further into Southern Missouri Bancorp's strong EPS growth. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. These things considered, this is one stock worth watching. It is worth noting though that we have found 1 warning sign for Southern Missouri Bancorp that you need to take into consideration.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Southern Missouri Bancorp, you'll probably love this free list of growing companies that insiders are buying.
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.
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