If EPS Growth Is Important To You, Valley National Bancorp (NASDAQ:VLY) Presents An Opportunity
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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Valley National Bancorp (NASDAQ:VLY). 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 Valley National Bancorp
How Quickly Is Valley National Bancorp 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. Valley National Bancorp managed to grow EPS by 17% per year, over three years. That's a pretty good rate, if the company can sustain it.
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 Valley National Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Valley National Bancorp maintained stable EBIT margins over the last year, all while growing revenue 34% to US$2.0b. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Valley National Bancorp's future EPS 100% free.
Are Valley National 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We do note that, in the last year, insiders sold US$71k worth of shares. But that's far less than the US$1.2m insiders spent purchasing stock. We find this encouraging because it suggests they are optimistic about Valley National Bancorp'sfuture. It is also worth noting that it was Independent Director Jennifer Steans who made the biggest single purchase, worth US$515k, paying US$10.29 per share.
On top of the insider buying, it's good to see that Valley National Bancorp insiders have a valuable investment in the business. Given insiders own a significant chunk of shares, currently valued at US$72m, they have plenty of motivation to push the business to succeed. This would indicate that the goals of shareholders and management are one and the same.
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. That's because Valley National Bancorp's CEO, Ira Robbins, is paid at a relatively modest level when compared to other CEOs for companies of this size. The median total compensation for CEOs of companies similar in size to Valley National Bancorp, with market caps between US$4.0b and US$12b, is around US$7.9m.
Valley National Bancorp offered total compensation worth US$6.0m to its CEO in the year to December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Should You Add Valley National Bancorp To Your Watchlist?
One important encouraging feature of Valley National Bancorp is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. It is worth noting though that we have found 1 warning sign for Valley National Bancorp that you need to take into consideration.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Valley National 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.
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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