Here's Why We Think Summit State Bank (NASDAQ:SSBI) 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. 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 Summit State Bank (NASDAQ:SSBI), 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.
Check out our latest analysis for Summit State Bank
How Quickly Is Summit State Bank Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Summit State Bank has grown EPS by 32% 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 beaming.
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. Our analysis has highlighted that Summit State Bank's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Summit State Bank achieved similar EBIT margins to last year, revenue grew by a solid 9.0% to US$47m. 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.
Summit State Bank isn't a huge company, given its market capitalisation of US$104m. That makes it extra important to check on its balance sheet strength.
Are Summit State Bank 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Any way you look at it Summit State Bank shareholders can gain quiet confidence from the fact that insiders shelled out US$222k to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. It is also worth noting that it was company insider Dawn Ross who made the biggest single purchase, worth US$51k, paying US$15.65 per share.
The good news, alongside the insider buying, for Summit State Bank bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at US$23m. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 22% of the shares on issue for the business, an appreciable amount considering the market cap.
Does Summit State Bank Deserve A Spot On Your Watchlist?
For growth investors, Summit State Bank's raw rate of earnings growth is a beacon in the night. Furthermore, company insiders have been adding to their significant stake in the company. Astute investors will want to keep this stock on watch. 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 Summit State Bank is trading on a high P/E or a low P/E, relative to its industry.
The good news is that Summit State Bank is not the only growth stock with insider buying. Here's a list of them... 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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