It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Penns Woods Bancorp (NASDAQ:PWOD). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
How Fast Is Penns Woods Bancorp Growing Its Earnings Per Share?
Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. In previous twelve months, Penns Woods Bancorp's EPS has risen from US$2.18 to US$2.36. That amounts to a small improvement of 8.2%.
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. Our analysis has highlighted that Penns Woods 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. EBIT margins for Penns Woods Bancorp remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 7.1% to US$63m. 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. To see the actual numbers, click on the chart.
Penns Woods Bancorp isn't a huge company, given its market capitalisation of US$170m. That makes it extra important to check on its balance sheet strength.
Are Penns Woods Bancorp 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Shareholders in Penns Woods Bancorp will be more than happy to see insiders committing themselves to the company, spending US$485k 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. Zooming in, we can see that the biggest insider purchase was by CEO & Director Richard Grafmyre for US$59k worth of shares, at about US$23.45 per share.
Recent insider purchases of Penns Woods Bancorp stock is not the only way management has kept the interests of the general public shareholders in mind. To be specific, the CEO is paid modestly when compared to company peers of the same size. The median total compensation for CEOs of companies similar in size to Penns Woods Bancorp, with market caps between US$100m and US$400m, is around US$1.6m.
Penns Woods Bancorp offered total compensation worth US$1.4m to its CEO in the year to December 2021. 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 Penns Woods Bancorp To Your Watchlist?
As previously touched on, Penns Woods Bancorp is a growing business, which is encouraging. And there's more to Penns Woods Bancorp, with the insider buying and modest CEO pay being a great look for those with an eye on the company. If these factors aren't enough to secure Penns Woods Bancorp a spot on the watchlist, then it certainly warrants a closer look at the very least. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Penns Woods Bancorp is trading on a high P/E or a low P/E, relative to its industry.
The good news is that Penns Woods Bancorp 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.
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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.
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