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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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
So if you're like me, you might be more interested in profitable, growing companies, like BCB Bancorp (NASDAQ:BCBP). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.
BCB Bancorp's Earnings Per Share Are Growing.
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that BCB Bancorp has managed to grow EPS by 27% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that BCB Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. BCB Bancorp maintained stable EBIT margins over the last year, all while growing revenue 18% to US$106m. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of BCB 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 BCB Bancorp Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Any way you look at it BCB Bancorp shareholders can gain quiet confidence from the fact that insiders shelled out US$215k to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. It is also worth noting that it was Independent Chairman of the Board Mark Hogan who made the biggest single purchase, worth US$38k, paying US$15.10 per share.
The good news, alongside the insider buying, for BCB Bancorp bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have US$38m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 12% 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, Tom Coughlin, is paid less than the median for similar sized companies. For companies with market capitalizations between US$200m and US$800m, like BCB Bancorp, the median CEO pay is around US$2.6m.
The CEO of BCB Bancorp only received US$1.3m in total compensation for the year ending . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Is BCB Bancorp Worth Keeping An Eye On?
For growth investors like me, BCB Bancorp's raw rate of earnings growth is a beacon in the night. 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. It is worth noting though that we have found 1 warning sign for BCB Bancorp that you need to take into consideration.
As a growth investor I do like to see insider buying. But BCB Bancorp isn't the only one. You can see a a free list of them here.
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.