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 completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
So if you're like me, you might be more interested in profitable, growing companies, like Bank of the James Financial Group (NASDAQ:BOTJ). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
Bank of the James Financial Group's Earnings Per Share Are Growing.
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Bank of the James Financial Group grew its EPS by 9.8% per year. That's a pretty good rate, if the company can sustain it.
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. Not all of Bank of the James Financial Group's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note Bank of the James Financial Group's EBIT margins were flat over the last year, revenue grew by a solid 11% to US$29m. That's progress.
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.
Since Bank of the James Financial Group is no giant, with a market capitalization of US$63m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Bank of the James Financial Group Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, 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.
Any way you look at it Bank of the James Financial Group shareholders can gain quiet confidence from the fact that insiders shelled out US$324k to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. We also note that it was the , Lydia Langley, who made the biggest single acquisition, paying US$108k for shares at about US$14.30 each.
Does Bank of the James Financial Group Deserve A Spot On Your Watchlist?
As I already mentioned, Bank of the James Financial Group is a growing business, which is what I like to see. While some companies are struggling to grow EPS, Bank of the James Financial Group seems free from that morose affliction. The cherry on top is the insider share purchases, which provide an extra impetus to keep and eye on this stock, 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 Bank of the James Financial Group is trading on a high P/E or a low P/E, relative to its industry.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Bank of the James Financial Group, 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
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.