It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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 contrast to all that, I prefer to spend time on companies like Carolina Trust BancShares (NASDAQ:CART), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
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How Quickly Is Carolina Trust BancShares Increasing Earnings Per Share?
As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Carolina Trust BancShares has managed to grow EPS by 18% per year 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 see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Not all of Carolina Trust BancShares'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 Carolina Trust BancShares's EBIT margins were flat over the last year, revenue grew by a solid 29% to US$20m. That's progress.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
Carolina Trust BancShares isn't a huge company, given its market capitalization of US$77m. That makes it extra important to check on its balance sheet strength.
Are Carolina Trust BancShares Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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.
In the last twelve months Carolina Trust BancShares insiders spent US$28k on stock; good news for shareholders. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling. It is also worth noting that it was President Jerry Ocheltree who made the biggest single purchase, worth US$8.4k, paying US$7.91 per share.
Is Carolina Trust BancShares Worth Keeping An Eye On?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Carolina Trust BancShares's strong EPS growth. The growth rate whets my appetite for research, and the insider buying only increases my interest in the stock. To put it succinctly; Carolina Trust BancShares is a strong candidate for your watchlist. Now, you could try to make up your mind on Carolina Trust BancShares by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
The good news is that Carolina Trust BancShares is not the only growth stock with insider buying. Here's a 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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