Is Now The Time To Put South Plains Financial (NASDAQ:SPFI) On Your Watchlist?
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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like South Plains Financial (NASDAQ:SPFI). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for South Plains Financial
How Fast Is South Plains Financial Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, South Plains Financial has grown EPS by 32% 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.
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 South Plains Financial'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. South Plains Financial maintained stable EBIT margins over the last year, all while growing revenue 2.8% to US$229m. That's progress.
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.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for South Plains Financial?
Are South Plains Financial 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
The US$664k worth of shares that insiders sold during the last 12 months pales in comparison to the US$1.7m they spent on acquiring shares in the company. This bodes well for South Plains Financial as it highlights the fact that those who are important to the company having a lot of faith in its future. It is also worth noting that it was Independent Director Noe Valles who made the biggest single purchase, worth US$870k, paying US$29.00 per share.
The good news, alongside the insider buying, for South Plains Financial bulls is that insiders (collectively) have a meaningful investment in the stock. With a whopping US$78m worth of shares as a group, insiders have plenty riding on the company's success. Amounting to 18% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because South Plains Financial's CEO, Curtis Griffith, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between US$200m and US$800m, like South Plains Financial, the median CEO pay is around US$2.3m.
South Plains Financial's CEO took home a total compensation package worth US$1.2m in the year leading up to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. 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 South Plains Financial Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into South Plains Financial's 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. However, before you get too excited we've discovered 2 warning signs for South Plains Financial (1 shouldn't be ignored!) that you should be aware of.
The good news is that South Plains Financial 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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