U.S. Markets closed

Do Peoples Bancorp of North Carolina's (NASDAQ:PEBK) Earnings Warrant Your Attention?

Simply Wall St

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Peoples Bancorp of North Carolina (NASDAQ:PEBK). While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. 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 Peoples Bancorp of North Carolina

How Quickly Is Peoples Bancorp of North Carolina Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Peoples Bancorp of North Carolina managed to grow EPS by 13% per year, over three years. That's a good rate of growth, if it can be sustained.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of Peoples Bancorp of North Carolina's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note Peoples Bancorp of North Carolina's EBIT margins were flat over the last year, revenue grew by a solid 13% to US$62m. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

NasdaqGM:PEBK Income Statement, August 9th 2019

Since Peoples Bancorp of North Carolina is no giant, with a market capitalization of US$163m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Peoples Bancorp of North Carolina 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 Peoples Bancorp of North Carolina shares worth a considerable sum. To be specific, they have US$33m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 20% of the company; visible skin in the game.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between US$100m and US$400m, like Peoples Bancorp of North Carolina, the median CEO pay is around US$1.2m.

The Peoples Bancorp of North Carolina CEO received total compensation of just US$517k in the year to December 2018. That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. 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 a culture of integrity, in a broader sense.

Is Peoples Bancorp of North Carolina Worth Keeping An Eye On?

One positive for Peoples Bancorp of North Carolina is that it is growing EPS. That's nice to see. Earnings growth might be the main game for Peoples Bancorp of North Carolina, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Peoples Bancorp of North Carolina.

Although Peoples Bancorp of North Carolina certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.