If EPS Growth Is Important To You, Coastal Financial (NASDAQ:CCB) Presents An Opportunity
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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Coastal Financial (NASDAQ:CCB), which has not only revenues, but also profits. 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.
View our latest analysis for Coastal Financial
Coastal Financial's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Coastal Financial's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 46%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It's noted that Coastal 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 Coastal Financial achieved similar EBIT margins to last year, revenue grew by a solid 41% to US$261m. 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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Coastal Financial's forecast profits?
Are Coastal 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
While Coastal Financial insiders did net US$1.1m selling stock over the last year, they invested US$1.4m, a much higher figure. An optimistic sign for those with Coastal Financial in their watchlist. We also note that it was the Independent Director, Steven Hovde, who made the biggest single acquisition, paying US$1.1m for shares at about US$37.71 each.
The good news, alongside the insider buying, for Coastal Financial bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth US$105m. Coming in at 19% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.
Should You Add Coastal Financial To Your Watchlist?
Coastal Financial's earnings have taken off in quite an impressive fashion. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Coastal Financial deserves timely attention. Even so, be aware that Coastal Financial is showing 1 warning sign in our investment analysis , you should know about...
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Coastal 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.
