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Here's Why I Think Synovus Financial (NYSE:SNV) Might Deserve Your Attention Today

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·4 min read
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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.

So if you're like me, you might be more interested in profitable, growing companies, like Synovus Financial (NYSE:SNV). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Synovus Financial

How Quickly Is Synovus Financial Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Synovus Financial has grown EPS by 14% per year. That growth rate is fairly good, assuming the company can keep it up.

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. I note that Synovus Financial'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 Synovus Financial's EBIT margins were flat over the last year, revenue grew by a solid 12% to US$2.1b. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. 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 Synovus Financial.

Are Synovus Financial Insiders Aligned With All Shareholders?

Since Synovus Financial has a market capitalization of US$5.8b, 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. Given insiders own a small fortune of shares, currently valued at US$73m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between US$4.0b and US$12b, like Synovus Financial, the median CEO pay is around US$8.2m.

Synovus Financial offered total compensation worth US$5.6m 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. It can also be a sign of good governance, more generally.

Is Synovus Financial Worth Keeping An Eye On?

One important encouraging feature of Synovus Financial is that it is growing profits. Earnings growth might be the main game for Synovus Financial, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. Before you take the next step you should know about the 1 warning sign for Synovus Financial that we have uncovered.

Although Synovus Financial 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.

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.