For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. 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.
So if you're like me, you might be more interested in profitable, growing companies, like Bank of South Carolina (NASDAQ:BKSC). 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. 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.
How Quickly Is Bank of South Carolina Increasing Earnings Per Share?
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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Bank of South Carolina grew its EPS by 12% per year. That growth rate is fairly good, assuming the company can keep it up.
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. Not all of Bank of South 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 Bank of South Carolina's EBIT margins were flat over the last year, revenue grew by a solid 3.6% to US$19m. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Bank of South Carolina isn't a huge company, given its market capitalization of US$103m. That makes it extra important to check on its balance sheet strength.
Are Bank of South Carolina Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
We do note that, in the last year, insiders sold -US$49.7k worth of shares. But that's far less than the US$2.4m insiders spend purchasing stock. This makes me even more interested in Bank of South Carolina because it suggests that those who understand the company best, are optimistic. Zooming in, we can see that the biggest insider purchase was by President Fleetwood Hassell for US$189k worth of shares, at about US$18.92 per share.
On top of the insider buying, it's good to see that Bank of South Carolina insiders have a valuable investment in the business. To be specific, they have US$22m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 21% of the company, demonstrating a degree of high-level alignment with shareholders.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Fleetwood Hassell, is paid less than the median for similar sized companies. I discovered that the median total compensation for the CEOs of companies like Bank of South Carolina with market caps under US$200m is about US$492k.
The Bank of South Carolina CEO received US$314k in compensation for the year ending December 2018. That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Does Bank of South Carolina Deserve A Spot On Your Watchlist?
As I already mentioned, Bank of South Carolina is a growing business, which is what I like to see. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. If you think Bank of South Carolina might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.
As a growth investor I do like to see insider buying. But Bank of South Carolina 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
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 email@example.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.