Here's Why We Think Home Federal Bancorp of Louisiana (NASDAQ:HFBL) Is Well Worth Watching
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like Home Federal Bancorp of Louisiana (NASDAQ:HFBL), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
View our latest analysis for Home Federal Bancorp of Louisiana
Home Federal Bancorp of Louisiana's Earnings Per Share Are Growing
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) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Home Federal Bancorp of Louisiana managed to grow EPS by 17% per year, over three years. That's a pretty good rate, if the company can sustain it. EPS growth figures have also been helped by share buybacks, showing the market that the company is in a position of financial strength, allowing it to return capital to shareholders.
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. Not all of Home Federal Bancorp of Louisiana's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note Home Federal Bancorp of Louisiana achieved similar EBIT margins to last year, revenue grew by a solid 7.1% to US$22m. That's a real positive.
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.
Home Federal Bancorp of Louisiana isn't a huge company, given its market capitalisation of US$56m. That makes it extra important to check on its balance sheet strength.
Are Home Federal Bancorp of Louisiana Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Home Federal Bancorp of Louisiana insiders have a significant amount of capital invested 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. Those holdings account for over 28% of the company; visible skin in the game.
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Home Federal Bancorp of Louisiana with market caps under US$200m is about US$767k.
Home Federal Bancorp of Louisiana's CEO took home a total compensation package worth US$578k in the year leading up to June 2022. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Does Home Federal Bancorp of Louisiana Deserve A Spot On Your Watchlist?
As previously touched on, Home Federal Bancorp of Louisiana is a growing business, which is encouraging. The fact that EPS is growing is a genuine positive for Home Federal Bancorp of Louisiana, but the pleasant picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. Before you take the next step you should know about the 2 warning signs for Home Federal Bancorp of Louisiana that we have uncovered.
The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.
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