With EPS Growth And More, Banc of California (NYSE:BANC) Makes An Interesting Case
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. 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 Banc of California (NYSE:BANC), 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 Banc of California
How Fast Is Banc of California Growing Its Earnings Per Share?
Over the last three years, Banc of California has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Impressively, Banc of California's EPS catapulted from US$0.95 to US$1.96, over the last year. Year on year growth of 105% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. It's noted that Banc of California's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Banc of California remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 35% to US$361m. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, 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 Banc of California's future EPS 100% free.
Are Banc of California 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
One shining light for Banc of California is the serious outlay one insider has made to buy shares, in the last year. Specifically, in one large transaction Independent Director James Barker paid US$801k, for stock at US$16.54 per share. It doesn't get much better than that, in terms of large investments from insiders.
It's reassuring that Banc of California insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Namely, Banc of California has a very reasonable level of CEO pay. For companies with market capitalisations between US$400m and US$1.6b, like Banc of California, the median CEO pay is around US$3.9m.
Banc of California's CEO took home a total compensation package worth US$2.7m in the year leading up to December 2021. That is actually below the median for CEO's of similarly sized companies. 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.
Does Banc of California Deserve A Spot On Your Watchlist?
Banc of California's earnings per share have been soaring, with growth rates sky high. The company can also boast of insider buying, and reasonable remuneration for the CEO. It could be that Banc of California is at an inflection point, given the EPS growth. For those attracted to fast growth, we'd suggest this stock merits monitoring. Before you take the next step you should know about the 2 warning signs for Banc of California (1 is a bit unpleasant!) that we have uncovered.
Keen growth investors love to see insider buying. Thankfully, Banc of California isn't the only one. You can see a a free list of them here.
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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