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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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Capital City Bank Group (NASDAQ:CCBG). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
How Fast Is Capital City Bank Group Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Capital City Bank Group has managed to grow EPS by 25% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
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. I note that Capital City Bank Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Capital City Bank Group maintained stable EBIT margins over the last year, all while growing revenue 15% to US$217m. That's progress.
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.
Fortunately, we've got access to analyst forecasts of Capital City Bank Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Capital City Bank 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
It's good to see Capital City Bank Group insiders walking the walk, by spending US$356k 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. Zooming in, we can see that the biggest insider purchase was by Independent Director Allan Bense for US$124k worth of shares, at about US$22.84 per share.
The good news, alongside the insider buying, for Capital City Bank Group bulls is that insiders (collectively) have a meaningful investment in the stock. With a whopping US$97m worth of shares as a group, insiders have plenty riding on the company's success. At 21% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.
Is Capital City Bank Group Worth Keeping An Eye On?
For growth investors like me, Capital City Bank Group's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So it's fair to say I think this stock may well deserve a spot on your watchlist. However, before you get too excited we've discovered 1 warning sign for Capital City Bank Group that you should be aware of.
The good news is that Capital City Bank Group is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
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.