Here's Why We Think Unity Bancorp (NASDAQ:UNTY) Might Deserve Your Attention Today
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Unity Bancorp (NASDAQ:UNTY). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for Unity Bancorp
Unity Bancorp's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Unity Bancorp has grown EPS by 24% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about. Getting in to the the finer details, it important to know that the EPS growth has been helped by share buybacks, demonstrating that the business is positioned to return capital to its shareholders.
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. Not all of Unity Bancorp's 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. EBIT margins for Unity Bancorp remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 8.0% to US$100m. That's progress.
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.
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 Unity Bancorp's future profits.
Are Unity Bancorp Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Insiders in Unity Bancorp both added to and reduced their holdings over the preceding 12 months. All in all though, their acquisitions outweighed the amount of shares they sold off. So, on balance, the insider transactions are mildly encouraging. It is also worth noting that it was Founder & Chairman of the Board David Dallas who made the biggest single purchase, worth US$245k, paying US$24.52 per share.
The good news, alongside the insider buying, for Unity Bancorp bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at US$29m. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 10% of the company; visible skin in the game.
Is Unity Bancorp Worth Keeping An Eye On?
You can't deny that Unity Bancorp has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. Now, you could try to make up your mind on Unity Bancorp by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
Keen growth investors love to see insider buying. Thankfully, Unity Bancorp isn't the only one. You can see a a free list of them here.
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.
