Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Central Valley Community Bancorp (NASDAQ:CVCY). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
How Fast Is Central Valley Community Bancorp Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Central Valley Community Bancorp grew its EPS by 16% per year. That's a good rate of growth, if it can be sustained.
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 Central Valley Community Bancorp's 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. Central Valley Community Bancorp maintained stable EBIT margins over the last year, all while growing revenue 6.5% to US$88m. 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.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Central Valley Community Bancorp's future profits.
Are Central Valley Community Bancorp Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
It's good to see Central Valley Community Bancorp insiders walking the walk, by spending US$529k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. It is also worth noting that it was Independent Director Louis McMurray who made the biggest single purchase, worth US$154k, paying US$15.51 per share.
On top of the insider buying, it's good to see that Central Valley Community Bancorp insiders have a valuable investment in the business. Indeed, they hold US$31m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 17% of the company; visible skin in the game.
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 Central Valley Community Bancorp's CEO, James Kim, is paid at a relatively modest level when compared to other CEOs for companies of this size. The median total compensation for CEOs of companies similar in size to Central Valley Community Bancorp, with market caps between US$100m and US$400m, is around US$1.6m.
Central Valley Community Bancorp's CEO took home a total compensation package worth US$863k in the year leading up to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does Central Valley Community Bancorp Deserve A Spot On Your Watchlist?
One positive for Central Valley Community Bancorp is that it is growing EPS. That's nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Central Valley Community Bancorp (at least 1 which is concerning) , and understanding these should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Central Valley Community Bancorp, 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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