U.S. markets close in 2 hours 55 minutes
  • S&P 500

    4,231.28
    +29.66 (+0.71%)
     
  • Dow 30

    34,725.53
    +177.00 (+0.51%)
     
  • Nasdaq

    13,776.89
    +144.05 (+1.06%)
     
  • Russell 2000

    2,267.17
    +25.75 (+1.15%)
     
  • Crude Oil

    65.01
    +0.30 (+0.46%)
     
  • Gold

    1,832.10
    +16.40 (+0.90%)
     
  • Silver

    27.48
    -0.00 (-0.01%)
     
  • EUR/USD

    1.2158
    +0.0090 (+0.74%)
     
  • 10-Yr Bond

    1.5770
    +0.0160 (+1.02%)
     
  • GBP/USD

    1.3988
    +0.0096 (+0.69%)
     
  • USD/JPY

    108.6480
    -0.4370 (-0.40%)
     
  • BTC-USD

    58,516.11
    +1,648.87 (+2.90%)
     
  • CMC Crypto 200

    1,510.01
    +74.23 (+5.17%)
     
  • FTSE 100

    7,129.71
    +53.54 (+0.76%)
     
  • Nikkei 225

    29,357.82
    +26.45 (+0.09%)
     

Here's Why I Think SVB Financial Group (NASDAQ:SIVB) Might Deserve Your Attention Today

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
Simply Wall St
·4 min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like SVB Financial Group (NASDAQ:SIVB). 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.

View our latest analysis for SVB Financial Group

How Fast Is SVB Financial Group 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). That makes EPS growth an attractive quality for any company. Impressively, SVB Financial Group has grown EPS by 35% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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). Not all of SVB Financial Group's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note SVB Financial Group's EBIT margins were flat over the last year, revenue grew by a solid 16% to US$3.7b. 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.

earnings-and-revenue-history
earnings-and-revenue-history

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for SVB Financial Group.

Are SVB Financial Group Insiders Aligned With All Shareholders?

Since SVB Financial Group has a market capitalization of US$27b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$122m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

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. I discovered that the median total compensation for the CEOs of companies like SVB Financial Group, with market caps over US$8.0b, is about US$11m.

SVB Financial Group offered total compensation worth US$7.5m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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. I'd also argue reasonable pay levels attest to good decision making more generally.

Is SVB Financial Group Worth Keeping An Eye On?

For growth investors like me, SVB Financial Group's raw rate of earnings growth is a beacon in the night. 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 SVB Financial Group is worth keeping an eye on. We don't want to rain on the parade too much, but we did also find 3 warning signs for SVB Financial Group that you need to be mindful of.

Although SVB Financial Group certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.