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Should You Be Adding Sterling Bancorp (Southfield MI) (NASDAQ:SBT) To Your Watchlist Today?

Simply Wall St

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 Sterling Bancorp (Southfield MI) (NASDAQ:SBT). 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.

Check out our latest analysis for Sterling Bancorp (Southfield MI)

Sterling Bancorp (Southfield MI)'s Earnings Per Share Are Growing.

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That makes EPS growth an attractive quality for any company. Impressively, Sterling Bancorp (Southfield MI) has grown EPS by 19% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners. And for those who like the finer details, I'll add that the EPS growth has been helped by share buybacks, demonstrating that the business is positioned to return capital to its shareholders.

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). I note that Sterling Bancorp (Southfield MI)'s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Sterling Bancorp (Southfield MI)'s EBIT margins were flat over the last year, revenue grew by a solid 3.0% to US$136m. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

NasdaqCM:SBT Income Statement, November 19th 2019

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Sterling Bancorp (Southfield MI).

Are Sterling Bancorp (Southfield MI) Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. 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.

Like a sturdy phalanx Sterling Bancorp (Southfield MI) insiders have stood united by refusing to sell shares over the last year. But my excitement comes from the US$89k that Chairman & CEO Gary Judd spent buying shares (at an average price of about US$8.85).

The good news, alongside the insider buying, for Sterling Bancorp (Southfield MI) bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$149m. That equates to 30% of the company, making insiders powerful and aligned with other shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.

Should You Add Sterling Bancorp (Southfield MI) To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Sterling Bancorp (Southfield MI)'s strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. So I do think this is one stock worth watching. Now, you could try to make up your mind on Sterling Bancorp (Southfield MI) by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

The good news is that Sterling Bancorp (Southfield MI) 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

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.

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. Thank you for reading.