It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 William Penn Bancorporation (NASDAQ:WMPN). 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.
William Penn Bancorporation's Improving Profits
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So EPS growth can certainly encourage an investor to take note of a stock. William Penn Bancorporation's EPS has risen over the last 12 months, growing from US$0.26 to US$0.30. That's a 15% gain; respectable growth in the broader scheme of things.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of William Penn Bancorporation'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 William Penn Bancorporation remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 5.7% to US$25m. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
William Penn Bancorporation isn't a huge company, given its market capitalisation of US$162m. That makes it extra important to check on its balance sheet strength.
Are William Penn Bancorporation 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
While William Penn Bancorporation insiders did net US$158k selling stock over the last year, they invested US$767k, a much higher figure. This overall confidence in the company at current the valuation signals their optimism. It is also worth noting that it was President Kenneth Stephon who made the biggest single purchase, worth US$144k, paying US$11.49 per share.
It's commendable to see that insiders have been buying shares in William Penn Bancorporation, but there is more evidence of shareholder friendly management. Specifically, the CEO is paid quite reasonably for a company of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like William Penn Bancorporation with market caps between US$100m and US$400m is about US$1.7m.
The CEO of William Penn Bancorporation only received US$646k in total compensation for the year ending June 2021. First impressions seem to indicate a compensation policy that is favourable to shareholders. 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.
Does William Penn Bancorporation Deserve A Spot On Your Watchlist?
As previously touched on, William Penn Bancorporation is a growing business, which is encouraging. And there's more to love too, with modest CEO remuneration and insider buying interest continuing the positives for the company. If these factors aren't enough to secure William Penn Bancorporation a spot on the watchlist, then it certainly warrants a closer look at the very least. Of course, just because William Penn Bancorporation is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
Keen growth investors love to see insider buying. Thankfully, William Penn Bancorporation 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.
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