Does Old Point Financial (NASDAQ:OPOF) Deserve A Spot On Your Watchlist?
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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
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 Old Point Financial (NASDAQ:OPOF). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Check out our latest analysis for Old Point Financial
Old Point Financial's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Over the last three years, Old Point Financial has grown EPS by 9.4% per year. That growth rate is fairly good, assuming the company can keep it up.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It's noted that Old Point Financial's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Old Point Financial achieved similar EBIT margins to last year, revenue grew by a solid 17% to US$61m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Since Old Point Financial is no giant, with a market capitalisation of US$91m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Old Point Financial Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
It's good to see Old Point Financial insiders walking the walk, by spending US$220k on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. It is also worth noting that it was Chairman A. Kauders who made the biggest single purchase, worth US$39k, paying US$17.45 per share.
Along with the insider buying, another encouraging sign for Old Point Financial is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at US$15m. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 16% 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, Rob Shuford is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Old Point Financial with market caps under US$200m is about US$760k.
Old Point Financial offered total compensation worth US$606k to its CEO in the year to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Should You Add Old Point Financial To Your Watchlist?
One positive for Old Point Financial 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. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Before you take the next step you should know about the 1 warning sign for Old Point Financial that we have uncovered.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Old Point Financial, 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.
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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.
