Should You Be Adding Cincinnati Bancorp (NASDAQ:CNNB) 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.'
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Cincinnati Bancorp (NASDAQ:CNNB). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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 Cincinnati Bancorp
How Fast Is Cincinnati Bancorp Growing Its Earnings Per Share?
In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that Cincinnati Bancorp grew its EPS from US$0.20 to US$1.70, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Not all of Cincinnati Bancorp'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. Cincinnati Bancorp maintained stable EBIT margins over the last year, all while growing revenue 122% to US$19m. That's a real positive.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
Cincinnati Bancorp isn't a huge company, given its market capitalization of US$42m. That makes it extra important to check on its balance sheet strength.
Are Cincinnati 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
One positive for Cincinnati Bancorp, is that company insiders paid US$49k for shares in the last year. While this isn't much, we also note an absence of sales. It is also worth noting that it was Executive Chairman of the Board & CEO Robert Bedinghaus who made the biggest single purchase, worth US$14k, paying US$13.90 per share.
I do like that insiders have been buying shares in Cincinnati Bancorp, but there is more evidence of shareholder friendly management. Specifically, the CEO is paid quite reasonably for a company of this size. I discovered that the median total compensation for the CEOs of companies like Cincinnati Bancorp with market caps under US$200m is about US$547k.
The CEO of Cincinnati Bancorp only received US$264k in total compensation for the year ending . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. I'd also argue reasonable pay levels attest to good decision making more generally.
Is Cincinnati Bancorp Worth Keeping An Eye On?
Cincinnati Bancorp's earnings have taken off like any random crypto-currency did, back in 2017. Better yet, we can observe insider buying and the chief executive pay looks reasonable. The strong EPS growth suggests Cincinnati Bancorp may be at an inflection point. If so, then it the potential for further gains probably merit a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for Cincinnati Bancorp you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Cincinnati 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.
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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