Should You Be Adding Generations Bancorp NY (NASDAQ:GBNY) To Your Watchlist Today?
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 Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
So if you're like me, you might be more interested in profitable, growing companies, like Generations Bancorp NY (NASDAQ:GBNY). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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.
View our latest analysis for Generations Bancorp NY
How Quickly Is Generations Bancorp NY Increasing Earnings Per Share?
As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. Who among us would not applaud Generations Bancorp NY's stratospheric annual EPS growth of 60%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.
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. Not all of Generations Bancorp NY'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. While we note Generations Bancorp NY's EBIT margins were flat over the last year, revenue grew by a solid 12% to US$14m. That's progress.
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.
Since Generations Bancorp NY is no giant, with a market capitalization of US$28m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Generations Bancorp NY 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
We haven't seen any insiders selling Generations Bancorp NY shares, in the last year. So it's definitely nice that President Menzo Case bought US$24k worth of shares at an average price of around US$9.85.
I do like that insiders have been buying shares in Generations Bancorp NY, but there is more evidence of shareholder friendly management. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalizations under US$200m, like Generations Bancorp NY, the median CEO pay is around US$545k.
The Generations Bancorp NY CEO received US$334k in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.
Is Generations Bancorp NY Worth Keeping An Eye On?
Generations Bancorp NY'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. It could be that Generations Bancorp NY is at an inflection point, given the EPS growth. For those chasing fast growth, then, I'd suggest to stock merits monitoring. What about risks? Every company has them, and we've spotted 1 warning sign for Generations Bancorp NY you should know about.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Generations Bancorp NY, 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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