Here's Why I Think Northfield Bancorp (Staten Island NY) (NASDAQ:NFBK) Is An Interesting Stock
Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Northfield Bancorp (Staten Island NY) (NASDAQ:NFBK). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
See our latest analysis for Northfield Bancorp (Staten Island NY)
How Fast Is Northfield Bancorp (Staten Island NY) Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Northfield Bancorp (Staten Island NY) has grown EPS by 30% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that Northfield Bancorp (Staten Island NY)'s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Northfield Bancorp (Staten Island NY)'s EBIT margins were flat over the last year, revenue grew by a solid 43% to US$172m. That's a real positive.
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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Northfield Bancorp (Staten Island NY) EPS 100% free.
Are Northfield Bancorp (Staten Island NY) Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Northfield Bancorp (Staten Island NY) shares worth a considerable sum. To be specific, they have US$34m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 4.4% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. Well, based on the CEO pay, I'd say they are indeed. For companies with market capitalizations between US$400m and US$1.6b, like Northfield Bancorp (Staten Island NY), the median CEO pay is around US$2.4m.
Northfield Bancorp (Staten Island NY) offered total compensation worth US$1.3m to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, 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.
Is Northfield Bancorp (Staten Island NY) Worth Keeping An Eye On?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Northfield Bancorp (Staten Island NY)'s strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. This may only be a fast rundown, but the takeaway for me is that Northfield Bancorp (Staten Island NY) is worth keeping an eye on. We should say that we've discovered 2 warning signs for Northfield Bancorp (Staten Island NY) (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.
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.
