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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 completely 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.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in RBB Bancorp (NASDAQ:RBB). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
RBB Bancorp'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). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, RBB Bancorp has grown EPS by 7.1% per year. While that sort of growth rate isn't amazing, it does show the business is growing.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that RBB Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. RBB Bancorp maintained stable EBIT margins over the last year, all while growing revenue 19% to US$124m. That's progress.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future RBB Bancorp EPS 100% free.
Are RBB Bancorp 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.
RBB Bancorp top brass are certainly in sync, not having sold any shares, over the last year. But my excitement comes from the US$64k that Independent Chairman of the Board James W. Kao spent buying shares (at an average price of about US$12.82).
On top of the insider buying, it's good to see that RBB Bancorp insiders have a valuable investment in the business. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$138m. That equates to 28% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.
Is RBB Bancorp Worth Keeping An Eye On?
As I already mentioned, RBB Bancorp is a growing business, which is what I like to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. We should say that we've discovered 1 warning sign for RBB Bancorp that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of RBB 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.
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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