Here's Why We Think Lake Shore Bancorp (NASDAQ:LSBK) Might Deserve Your Attention Today
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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Lake Shore Bancorp (NASDAQ:LSBK). 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.
See our latest analysis for Lake Shore Bancorp
Lake Shore Bancorp's Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Lake Shore Bancorp has grown EPS by 20% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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 Lake Shore Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Lake Shore Bancorp maintained stable EBIT margins over the last year, all while growing revenue 15% to US$28m. That's progress.
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.
Since Lake Shore Bancorp is no giant, with a market capitalisation of US$65m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Lake Shore Bancorp 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Any way you look at it Lake Shore Bancorp shareholders can gain quiet confidence from the fact that insiders shelled out US$283k to buy stock, over the last year. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. Zooming in, we can see that the biggest insider purchase was by CEO, President & Director Kim Liddell for US$249k worth of shares, at about US$11.50 per share.
Does Lake Shore Bancorp Deserve A Spot On Your Watchlist?
For growth investors, Lake Shore Bancorp's raw rate of earnings growth is a beacon in the night. Not only is that growth rate rather juicy, but the insider buying adds fuel to the fire. So on this analysis, Lake Shore Bancorp is probably worth spending some time on. Even so, be aware that Lake Shore Bancorp is showing 2 warning signs in our investment analysis , you should know about...
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Lake Shore Bancorp, you'll probably love this free list of growing companies that insiders are buying.
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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