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Should You Be Adding HomeTrust Bancshares (NASDAQ:HTBI) To Your Watchlist Today?

Simply Wall St

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in HomeTrust Bancshares (NASDAQ:HTBI). 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. 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 HomeTrust Bancshares

How Quickly Is HomeTrust Bancshares Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, HomeTrust Bancshares has grown EPS by 30% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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. Not all of HomeTrust Bancshares'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. HomeTrust Bancshares maintained stable EBIT margins over the last year, all while growing revenue 3.0% to US$127m. That's a real positive.

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.

NasdaqGS:HTBI Income Statement, December 21st 2019

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check HomeTrust Bancshares's balance sheet strength, before getting too excited.

Are HomeTrust Bancshares Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We do note that HomeTrust Bancshares insiders netted -US$12.8k worth of shares over the last year. But the silver lining to that cloud is that John Switzer, the Independent Director, spent US$26k buying shares at an average price of US$26.39. And that's a reason to be optimistic.

Along with the insider buying, another encouraging sign for HomeTrust Bancshares is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$19m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 3.9% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

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, Dana Stonestreet, is paid less than the median for similar sized companies. For companies with market capitalizations between US$200m and US$800m, like HomeTrust Bancshares, the median CEO pay is around US$1.7m.

The HomeTrust Bancshares CEO received US$1m in compensation for the year ending June 2019. 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. It can also be a sign of good governance, more generally.

Does HomeTrust Bancshares Deserve A Spot On Your Watchlist?

For growth investors like me, HomeTrust Bancshares's raw rate of earnings growth is a beacon in the night. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So it's fair to say I think this stock may well deserve a spot on your watchlist. Of course, just because HomeTrust Bancshares is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

As a growth investor I do like to see insider buying. But HomeTrust Bancshares 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

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.