If You Like EPS Growth Then Check Out Plumas Bancorp (NASDAQ:PLBC) Before It's Too Late
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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
In contrast to all that, I prefer to spend time on companies like Plumas Bancorp (NASDAQ:PLBC), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.
Check out our latest analysis for Plumas Bancorp
How Quickly Is Plumas Bancorp Increasing Earnings Per Share?
As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, Plumas Bancorp's EPS has grown 27% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that Plumas Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Plumas Bancorp's EBIT margins were flat over the last year, revenue grew by a solid 11% to US$44m. 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.
Plumas Bancorp isn't a huge company, given its market capitalization of US$134m. That makes it extra important to check on its balance sheet strength.
Are Plumas Bancorp Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Plumas Bancorp insiders have a significant amount of capital invested in the stock. Indeed, they hold US$15m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 11% of the company; visible skin in the game.
Should You Add Plumas Bancorp To Your Watchlist?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Plumas Bancorp's strong EPS growth. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. 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 Plumas Bancorp is trading on a high P/E or a low P/E, relative to its industry.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.
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. Thank you for reading.
