U.S. Markets open in 4 hrs 41 mins
  • S&P Futures

    4,150.25
    +18.00 (+0.44%)
     
  • Dow Futures

    34,087.00
    -61.00 (-0.18%)
     
  • Nasdaq Futures

    12,576.50
    +162.25 (+1.31%)
     
  • Russell 2000 Futures

    1,966.20
    -2.20 (-0.11%)
     
  • Crude Oil

    76.46
    +0.05 (+0.07%)
     
  • Gold

    1,970.60
    +27.80 (+1.43%)
     
  • Silver

    24.30
    +0.69 (+2.93%)
     
  • EUR/USD

    1.1005
    +0.0011 (+0.0990%)
     
  • 10-Yr Bond

    3.3970
    0.0000 (0.00%)
     
  • Vix

    17.62
    -1.78 (-9.18%)
     
  • GBP/USD

    1.2339
    -0.0033 (-0.2677%)
     
  • USD/JPY

    128.8790
    -0.0460 (-0.0357%)
     
  • BTC-USD

    23,807.11
    +814.40 (+3.54%)
     
  • CMC Crypto 200

    543.20
    +300.52 (+123.83%)
     
  • FTSE 100

    7,781.97
    +20.86 (+0.27%)
     
  • Nikkei 225

    27,402.05
    +55.17 (+0.20%)
     

Here's Why I Think ChoiceOne Financial Services (NASDAQ:COFS) Might Deserve Your Attention Today

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. 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 the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like ChoiceOne Financial Services (NASDAQ:COFS). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for ChoiceOne Financial Services

How Quickly Is ChoiceOne Financial Services Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years ChoiceOne Financial Services grew its EPS by 12% per year. That's a good rate of growth, if it can be sustained.

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. Not all of ChoiceOne Financial Services'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. ChoiceOne Financial Services maintained stable EBIT margins over the last year, all while growing revenue 5.3% to US$80m. 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.

earnings-and-revenue-history
earnings-and-revenue-history

Since ChoiceOne Financial Services is no giant, with a market capitalization of US$187m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are ChoiceOne Financial Services Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Not only did ChoiceOne Financial Services insiders refrain from selling stock during the year, but they also spent US$107k buying it. That's nice to see, because it suggests insiders are optimistic. We also note that it was the CEO & Director, Kelly Potes, who made the biggest single acquisition, paying US$77k for shares at about US$25.60 each.

On top of the insider buying, it's good to see that ChoiceOne Financial Services insiders have a valuable investment in the business. Indeed, they hold US$15m worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 8.2% of the company, demonstrating a degree of high-level alignment with shareholders.

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. The cherry on top is that the CEO, Kelly Potes is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like ChoiceOne Financial Services with market caps between US$100m and US$400m is about US$1.5m.

The ChoiceOne Financial Services CEO received total compensation of just US$661k in the year to . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add ChoiceOne Financial Services To Your Watchlist?

As I already mentioned, ChoiceOne Financial Services is a growing business, which is what I like to see. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. Now, you could try to make up your mind on ChoiceOne Financial Services 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 ChoiceOne Financial Services 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.