With EPS Growth And More, First Guaranty Bancshares (NASDAQ:FGBI) Makes An Interesting Case
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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
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 First Guaranty Bancshares (NASDAQ:FGBI). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
See our latest analysis for First Guaranty Bancshares
How Quickly Is First Guaranty Bancshares Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, First Guaranty Bancshares has grown EPS by 32% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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. It's noted that First Guaranty Bancshares' 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 First Guaranty Bancshares remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 16% to US$110m. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
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 First Guaranty Bancshares' future EPS 100% free.
Are First Guaranty Bancshares Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own First Guaranty Bancshares shares worth a considerable sum. Given insiders own a significant chunk of shares, currently valued at US$84m, they have plenty of motivation to push the business to succeed. At 32% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to First Guaranty Bancshares, with market caps between US$100m and US$400m, is around US$1.7m.
The First Guaranty Bancshares CEO received total compensation of just US$551k in the year to December 2021. First impressions seem to indicate a compensation policy that is favourable to shareholders. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Is First Guaranty Bancshares Worth Keeping An Eye On?
If you believe that share price follows earnings per share you should definitely be delving further into First Guaranty Bancshares' strong EPS growth. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. Everyone has their own preferences when it comes to investing but it definitely makes First Guaranty Bancshares look rather interesting indeed. What about risks? Every company has them, and we've spotted 2 warning signs for First Guaranty Bancshares (of which 1 makes us a bit uncomfortable!) you should know about.
Although First Guaranty Bancshares certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
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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