Here's Why We Think United Security Bancshares (NASDAQ:UBFO) Might Deserve Your Attention Today
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. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like United Security Bancshares (NASDAQ:UBFO). 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 United Security Bancshares
How Fast Is United Security Bancshares Growing?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. It certainly is nice to see that United Security Bancshares has managed to grow EPS by 30% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of United Security Bancshares' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note United Security Bancshares achieved similar EBIT margins to last year, revenue grew by a solid 14% to US$53m. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Since United Security Bancshares is no giant, with a market capitalisation of US$123m, you should definitely check its cash and debt before getting too excited about its prospects.
Are United Security Bancshares 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.
We do note that, in the last year, insiders sold US$133k worth of shares. But that's far less than the US$955k insiders spent purchasing stock. This bodes well for United Security Bancshares as it highlights the fact that those who are important to the company having a lot of faith in its future. Zooming in, we can see that the biggest insider purchase was by Director Jagroop Gill for US$511k worth of shares, at about US$6.47 per share.
Along with the insider buying, another encouraging sign for United Security Bancshares is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at US$25m. That's a lot of money, and no small incentive to work hard. That amounts to 20% of the company, demonstrating a degree of high-level alignment with shareholders.
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. The cherry on top is that the CEO, Dennis Woods is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalisations under US$200m, like United Security Bancshares, the median CEO pay is around US$689k.
The United Security Bancshares CEO received US$587k in compensation for the year ending December 2022. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Should You Add United Security Bancshares To Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into United Security Bancshares' strong EPS growth. Furthermore, company insiders have been adding to their significant stake in the company. Astute investors will want to keep this stock on watch. You should always think about risks though. Case in point, we've spotted 1 warning sign for United Security Bancshares you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of United Security Bancshares, you'll probably love this curated collection of companies in the US that have witnessed growth alongside 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.
