Here's Why We Think S&T Bancorp (NASDAQ:STBA) 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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like S&T Bancorp (NASDAQ:STBA). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide S&T Bancorp with the means to add long-term value to shareholders.
Check out our latest analysis for S&T Bancorp
S&T Bancorp's Improving Profits
S&T Bancorp has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, S&T Bancorp's EPS soared from US$3.01 to US$3.86, over the last year. That's a impressive gain of 28%.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Our analysis has highlighted that S&T Bancorp'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. EBIT margins for S&T Bancorp remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 14% to US$388m. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for S&T Bancorp's future profits.
Are S&T Bancorp 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Not only did S&T Bancorp insiders refrain from selling stock during the year, but they also spent US$80k buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading.
Along with the insider buying, another encouraging sign for S&T Bancorp is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$17m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 1.3% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because on our analysis the CEO, Chris McComish, is paid less than the median for similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like S&T Bancorp with market caps between US$1.0b and US$3.2b is about US$5.1m.
S&T Bancorp's CEO took home a total compensation package of US$2.5m in the year prior to December 2022. First impressions seem to indicate a compensation policy that is favourable to shareholders. 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.
Does S&T Bancorp Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into S&T Bancorp's strong EPS growth. On top of that, insiders own a significant stake in the company and have been buying more shares. Astute investors will want to keep this stock on watch. However, before you get too excited we've discovered 1 warning sign for S&T Bancorp that you should be aware of.
The good news is that S&T Bancorp is not the only growth stock with insider buying. Here's a list of growth-focused companies in the US 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.
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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.
