Here's Why We Think Civista Bancshares (NASDAQ:CIVB) Is Well Worth Watching
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Civista Bancshares (NASDAQ:CIVB). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Civista Bancshares with the means to add long-term value to shareholders.
Check out our latest analysis for Civista Bancshares
How Quickly Is Civista Bancshares Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Civista Bancshares has grown EPS by 15% per year. That's a good rate of growth, if it can be sustained.
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. It's noted that Civista Bancshares' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Civista Bancshares remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 30% to US$164m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Civista Bancshares' forecast profits?
Are Civista Bancshares Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.
Shareholders in Civista Bancshares will be more than happy to see insiders committing themselves to the company, spending US$243k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. We also note that it was the Director, Gerald Wurm, who made the biggest single acquisition, paying US$63k for shares at about US$17.87 each.
The good news, alongside the insider buying, for Civista Bancshares bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at US$16m. That's a lot of money, and no small incentive to work hard. That amounts to 5.4% of the company, demonstrating a degree of high-level alignment with shareholders.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because Civista Bancshares' CEO, Dennis Shaffer, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between US$100m and US$400m, like Civista Bancshares, the median CEO pay is around US$1.5m.
Civista Bancshares' CEO took home a total compensation package worth US$924k in the year leading up to December 2022. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Does Civista Bancshares Deserve A Spot On Your Watchlist?
One positive for Civista Bancshares is that it is growing EPS. That's nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. That makes the company a prime candidate for your watchlist - and arguably a research priority. You should always think about risks though. Case in point, we've spotted 1 warning sign for Civista Bancshares you should be aware of.
Keen growth investors love to see insider buying. Thankfully, Civista Bancshares 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.
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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.
