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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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Citizens Community Bancorp (NASDAQ:CZWI). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.
How Fast Is Citizens Community Bancorp Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. I, for one, am blown away by the fact that Citizens Community Bancorp has grown EPS by 49% per year, over the last three years. Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.
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. I note that Citizens Community Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Citizens Community Bancorp maintained stable EBIT margins over the last year, all while growing revenue 15% to US$65m. 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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Citizens Community Bancorp's forecast profits?
Are Citizens Community Bancorp Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
It's good to see Citizens Community Bancorp insiders walking the walk, by spending US$304k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. It is also worth noting that it was Independent Director James Lang who made the biggest single purchase, worth US$22k, paying US$10.98 per share.
Does Citizens Community Bancorp Deserve A Spot On Your Watchlist?
Citizens Community Bancorp's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. Growth investors should find it difficult to look past that strong EPS move. And indeed, it could be a sign that the business is at an inflection point. If that's the case, you may regret neglecting to put Citizens Community Bancorp on your watchlist. Still, you should learn about the 2 warning signs we've spotted with Citizens Community Bancorp (including 1 which doesn't sit too well with us) .
As a growth investor I do like to see insider buying. But Citizens Community Bancorp 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.
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. 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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