Here's Why We Think Ohio Valley Banc (NASDAQ:OVBC) Is Well Worth Watching
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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.
In contrast to all that, many investors prefer to focus on companies like Ohio Valley Banc (NASDAQ:OVBC), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Ohio Valley Banc with the means to add long-term value to shareholders.
View our latest analysis for Ohio Valley Banc
Ohio Valley Banc'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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Ohio Valley Banc grew its EPS by 10% per year. That's a pretty good rate, if the company can sustain it.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that Ohio Valley Banc's 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 Ohio Valley Banc remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 7.2% to US$55m. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Ohio Valley Banc isn't a huge company, given its market capitalisation of US$115m. That makes it extra important to check on its balance sheet strength.
Are Ohio Valley Banc Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
A great takeaway for shareholders is that company insiders within Ohio Valley Banc have collectively spent US$6.4k acquiring shares in the company. While this isn't much, we also note an absence of sales.
Along with the insider buying, another encouraging sign for Ohio Valley Banc is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at US$14m. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 13% of the shares on issue for the business, an appreciable amount considering the market cap.
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 on our analysis the CEO, Larry Miller, is paid less than the median for similar sized companies. For companies with market capitalisations under US$200m, like Ohio Valley Banc, the median CEO pay is around US$750k.
The Ohio Valley Banc CEO received US$623k in compensation for the year ending December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.
Should You Add Ohio Valley Banc To Your Watchlist?
One positive for Ohio Valley Banc is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Ohio Valley Banc is trading on a high P/E or a low P/E, relative to its industry.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Ohio Valley Banc, 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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