With EPS Growth And More, MetroCity Bankshares (NASDAQ:MCBS) Makes An Interesting Case
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. 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.
In contrast to all that, many investors prefer to focus on companies like MetroCity Bankshares (NASDAQ:MCBS), 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 MetroCity Bankshares
MetroCity Bankshares' Earnings Per Share Are Growing
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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, MetroCity Bankshares has grown EPS by 15% per year. 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 MetroCity Bankshares' 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 MetroCity Bankshares remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 22% to US$145m. 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. 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 MetroCity Bankshares' future EPS 100% free.
Are MetroCity Bankshares Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. MetroCity Bankshares followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$156m. This totals to 28% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Very encouraging.
While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations between US$200m and US$800m, like MetroCity Bankshares, the median CEO pay is around US$2.8m.
MetroCity Bankshares' CEO took home a total compensation package worth US$1.6m in the year leading up to December 2021. That seems pretty reasonable, especially given it's below the median for similar 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 a culture of integrity, in a broader sense.
Does MetroCity Bankshares Deserve A Spot On Your Watchlist?
As previously touched on, MetroCity Bankshares is a growing business, which is encouraging. Earnings growth might be the main attraction for MetroCity Bankshares, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. However, before you get too excited we've discovered 2 warning signs for MetroCity Bankshares (1 is significant!) that you should be aware of.
Although MetroCity Bankshares 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.
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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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