Here's Why We Think Northeast Bank (NASDAQ:NBN) Is Well Worth Watching
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Northeast Bank (NASDAQ:NBN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Northeast Bank with the means to add long-term value to shareholders.
See our latest analysis for Northeast Bank
How Fast Is Northeast Bank Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Northeast Bank's EPS has grown 31% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of Northeast Bank'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 Northeast Bank achieved similar EBIT margins to last year, revenue grew by a solid 10% to US$122m. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are Northeast Bank Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Northeast Bank insiders have a significant amount of capital invested in the stock. Holding US$54m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. At 15% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.
Should You Add Northeast Bank To Your Watchlist?
You can't deny that Northeast Bank has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Northeast Bank's continuing strength. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. You should always think about risks though. Case in point, we've spotted 1 warning sign for Northeast Bank you should be aware of.
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.
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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.
