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Is Now The Time To Put Glen Burnie Bancorp (NASDAQ:GLBZ) On Your Watchlist?

Simply Wall St

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In contrast to all that, I prefer to spend time on companies like Glen Burnie Bancorp (NASDAQ:GLBZ), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Glen Burnie Bancorp

How Quickly Is Glen Burnie Bancorp Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Glen Burnie Bancorp managed to grow EPS by 7.1% per year, over three years. While that sort of growth rate isn't amazing, it does show the business is growing.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that Glen Burnie Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Glen Burnie Bancorp maintained stable EBIT margins over the last year, all while growing revenue 4.5% to US$13m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

NasdaqCM:GLBZ Income Statement, September 26th 2019

Since Glen Burnie Bancorp is no giant, with a market capitalization of US$31m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Glen Burnie Bancorp Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

One positive for Glen Burnie Bancorp, is that company insiders paid US$27k for shares in the last year. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling. Zooming in, we can see that the biggest insider purchase was by President John Long for US$24k worth of shares, at about US$12.71 per share.

I do like that insiders have been buying shares in Glen Burnie Bancorp, but there is more evidence of shareholder friendly management. I refer to the very reasonable level of CEO pay. For companies with market capitalizations under US$200m, like Glen Burnie Bancorp, the median CEO pay is around US$490k.

Glen Burnie Bancorp offered total compensation worth US$343k to its CEO in the year to December 2018. That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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 Glen Burnie Bancorp Deserve A Spot On Your Watchlist?

One important encouraging feature of Glen Burnie Bancorp is that it is growing profits. Like chocolate chips in vanilla ice cream, the insider buying, and modest CEO pay, make it better. The sum of all that, for me, points to a quality business, and a genuine prospect for further research. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Glen Burnie Bancorp is trading on a high P/E or a low P/E, relative to its industry.

The good news is that Glen Burnie Bancorp is not the only growth stock with insider buying. Here's a list of them... 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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.