If EPS Growth Is Important To You, Northwest Bancshares (NASDAQ:NWBI) Presents An Opportunity
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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
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 Northwest Bancshares (NASDAQ:NWBI). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Northwest Bancshares
How Quickly Is Northwest Bancshares Increasing Earnings Per Share?
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) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Northwest Bancshares' EPS has grown 25% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
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. Not all of Northwest Bancshares' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note Northwest Bancshares achieved similar EBIT margins to last year, revenue grew by a solid 6.3% to US$534m. 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. For finer detail, click on the image.
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 Northwest Bancshares' future profits.
Are Northwest Bancshares 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.
Even though some insiders sold down their holdings, their actions speak louder than words with US$349k more invested than sold by people who know they company best. You could argue that level of buying implies genuine confidence in the business. Zooming in, we can see that the biggest insider purchase was by Independent Director Timothy Hunter for US$160k worth of shares, at about US$10.67 per share.
Along with the insider buying, another encouraging sign for Northwest Bancshares is that insiders, as a group, have a considerable shareholding. To be specific, they have US$16m worth of shares. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 1.0%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Louis Torchio, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to Northwest Bancshares, with market caps between US$1.0b and US$3.2b, is around US$5.1m.
The Northwest Bancshares CEO received total compensation of just US$1.2m in the year to December 2022. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.
Should You Add Northwest Bancshares To Your Watchlist?
For growth investors, Northwest Bancshares' raw rate of earnings growth is a beacon in the night. Furthermore, company insiders have been adding to their significant stake in the company. These things considered, this is one stock worth watching. It is worth noting though that we have found 2 warning signs for Northwest Bancshares (1 is potentially serious!) that you need to take into consideration.
The good news is that Northwest Bancshares is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
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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