Is Now The Time To Put Southern First Bancshares (NASDAQ:SFST) On Your Watchlist?
Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In contrast to all that, I prefer to spend time on companies like Southern First Bancshares (NASDAQ:SFST), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
Check out our latest analysis for Southern First Bancshares
How Quickly Is Southern First Bancshares Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that Southern First Bancshares has managed to grow EPS by 25% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
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. I note that Southern First Bancshares'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 Southern First Bancshares's EBIT margins were flat over the last year, revenue grew by a solid 51% to US$117m. 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.
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 Southern First Bancshares's future profits.
Are Southern First Bancshares Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Southern First Bancshares shares worth a considerable sum. To be specific, they have US$24m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 5.8% of the company; visible skin in the game.
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like Southern First Bancshares with market caps between US$200m and US$800m is about US$1.8m.
The Southern First Bancshares CEO received US$1.3m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.
Is Southern First Bancshares Worth Keeping An Eye On?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Southern First Bancshares's strong EPS growth. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. Each to their own, but I think all this makes Southern First Bancshares look rather interesting indeed. You should always think about risks though. Case in point, we've spotted 3 warning signs for Southern First Bancshares you should be aware of, and 1 of them is significant.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.
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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.
