I Built A List Of Growing Companies And PCSB Financial (NASDAQ:PCSB) Made The Cut
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.
In contrast to all that, I prefer to spend time on companies like PCSB Financial (NASDAQ:PCSB), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
See our latest analysis for PCSB Financial
How Fast Is PCSB Financial Growing Its Earnings Per Share?
Over the last three years, PCSB Financial has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that PCSB Financial's EPS have grown from US$0.55 to US$0.63 over twelve months. I doubt many would complain about that 14% gain. We should also note that the company has boosted EPS by buying back shares, showing the strength of its balance sheet.
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 PCSB Financial's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. It seems PCSB Financial is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not a major concern but nor does it point to the long term growth we like to see.
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.
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 PCSB Financial.
Are PCSB Financial 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. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
In the last year insider at PCSB Financial were both selling and buying shares; but happily, as a group they spent US$77k more on stock, than they netted from selling it. On balance, that's a good sign. We also note that it was the Vice Chairman & Lead Independent Director , Richard Weiss, who made the biggest single acquisition, paying US$72k for shares at about US$13.05 each.
On top of the insider buying, it's good to see that PCSB Financial insiders have a valuable investment in the business. To be specific, they have US$15m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 6.0% of the company, demonstrating a degree of high-level alignment with 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. The cherry on top is that the CEO, Joseph Roberto is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like PCSB Financial with market caps between US$100m and US$400m is about US$935k.
The PCSB Financial CEO received US$827k 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. It can also be a sign of good governance, more generally.
Should You Add PCSB Financial To Your Watchlist?
One positive for PCSB Financial is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. 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 PCSB Financial is trading on a high P/E or a low P/E, relative to its industry.
As a growth investor I do like to see insider buying. But PCSB Financial 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.
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. 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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