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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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
So if you're like me, you might be more interested in profitable, growing companies, like Home Federal Bancorp of Louisiana (NASDAQ:HFBL). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
Home Federal Bancorp of Louisiana's Earnings Per Share Are Growing.
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. Impressively, Home Federal Bancorp of Louisiana has grown EPS by 19% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that Home Federal Bancorp of Louisiana's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Home Federal Bancorp of Louisiana's EBIT margins were flat over the last year, revenue grew by a solid 20% to US$21m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
Since Home Federal Bancorp of Louisiana is no giant, with a market capitalization of US$61m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Home Federal Bancorp of Louisiana Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
In twelve months, insiders sold -US$17k worth of Home Federal Bancorp of Louisiana shares. On the other hand, Independent Director Scott Lawrence paid US$37k for shares, at a price of about US$15.62 per share. And that's a reason to be optimistic.
The good news, alongside the insider buying, for Home Federal Bancorp of Louisiana bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$14m worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 23% of the company, demonstrating a degree of high-level alignment with shareholders.
Should You Add Home Federal Bancorp of Louisiana To Your Watchlist?
You can't deny that Home Federal Bancorp of Louisiana has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. So I do think this is one stock worth watching. What about risks? Every company has them, and we've spotted 1 warning sign for Home Federal Bancorp of Louisiana you should know about.
As a growth investor I do like to see insider buying. But Home Federal Bancorp of Louisiana 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.
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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