Should You Be Adding Virginia National Bankshares (NASDAQ:VABK) To Your Watchlist Today?
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like Virginia National Bankshares (NASDAQ:VABK), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Virginia National Bankshares with the means to add long-term value to shareholders.
Check out our latest analysis for Virginia National Bankshares
Virginia National Bankshares' 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) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Virginia National Bankshares' EPS has grown 20% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Our analysis has highlighted that Virginia National Bankshares' revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Virginia National Bankshares maintained stable EBIT margins over the last year, all while growing revenue 2.2% to US$63m. That's encouraging news for the company!
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 Virginia National Bankshares is no giant, with a market capitalisation of US$165m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Virginia National Bankshares Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.
Shareholders in Virginia National Bankshares will be more than happy to see insiders committing themselves to the company, spending US$216k on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. We also note that it was the Chairman of the Board, William Dittmar, who made the biggest single acquisition, paying US$93k for shares at about US$30.94 each.
The good news, alongside the insider buying, for Virginia National Bankshares bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$19m worth of its stock. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 12% of the shares on issue for the business, an appreciable amount considering the market cap.
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, Glenn Rust is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Virginia National Bankshares, with market caps between US$100m and US$400m, is around US$1.6m.
Virginia National Bankshares offered total compensation worth US$975k to its CEO in the year to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does Virginia National Bankshares Deserve A Spot On Your Watchlist?
For growth investors, Virginia National Bankshares' raw rate of earnings growth is a beacon in the night. Furthermore, company insiders have been adding to their significant stake in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Virginia National Bankshares is trading on a high P/E or a low P/E, relative to its industry.
Keen growth investors love to see insider buying. Thankfully, Virginia National Bankshares 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.
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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.
