Should You Be Adding Bank of Princeton (NASDAQ:BPRN) To Your Watchlist Today?
Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
In contrast to all that, I prefer to spend time on companies like Bank of Princeton (NASDAQ:BPRN), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
View our latest analysis for Bank of Princeton
How Fast Is Bank of Princeton 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. That makes EPS growth an attractive quality for any company. As a tree reaches steadily for the sky, Bank of Princeton's EPS has grown 17% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
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. I note that Bank of Princeton's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Bank of Princeton maintained stable EBIT margins over the last year, all while growing revenue 28% to US$60m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Bank of Princeton's future profits.
Are Bank of Princeton Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Despite -US$40k worth of sales, Bank of Princeton insiders have overwhelmingly been buying the stock, spending US$462k on purchases in the last twelve months. You could argue that level of buying implies genuine confidence in the business. It is also worth noting that it was Martin Tuchman who made the biggest single purchase, worth US$119k, paying US$29.85 per share.
Along with the insider buying, another encouraging sign for Bank of Princeton is that insiders, as a group, have a considerable shareholding. To be specific, they have US$44m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 22% of the company; visible skin in the game.
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. The cherry on top is that the CEO, Ed Dietzler is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like Bank of Princeton with market caps between US$100m and US$400m is about US$1.1m.
The Bank of Princeton CEO received US$683k in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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 good governance, more generally.
Is Bank of Princeton Worth Keeping An Eye On?
You can't deny that Bank of Princeton has grown its earnings per share at a very impressive rate. That's attractive. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So I do think this is one stock worth watching. We don't want to rain on the parade too much, but we did also find 2 warning signs for Bank of Princeton (1 is a bit concerning!) that you need to be mindful of.
The good news is that Bank of Princeton 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.
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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