I Ran A Stock Scan For Earnings Growth And FNCB Bancorp (NASDAQ:FNCB) Passed With Ease
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. 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 FNCB Bancorp (NASDAQ:FNCB). 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.
View our latest analysis for FNCB Bancorp
FNCB Bancorp's Improving Profits
In the last three years FNCB Bancorp's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a wedge-tailed eagle on the wind, FNCB Bancorp's EPS soared from US$0.68 to US$1.13, in just one year. That's a commendable gain of 67%.
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 FNCB Bancorp'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 FNCB Bancorp's EBIT margins were flat over the last year, revenue grew by a solid 22% to US$56m. 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.
FNCB Bancorp isn't a huge company, given its market capitalization of US$188m. That makes it extra important to check on its balance sheet strength.
Are FNCB Bancorp 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.
In the last year insider at FNCB Bancorp were both selling and buying shares; but happily, as a group they spent US$106k more on stock, than they netted from selling it. Although I don't particularly like to see selling, the fact that they put more capital in, than they extracted, is a positive in my mind. We also note that it was the Independent Director, William Bracey, who made the biggest single acquisition, paying US$95k for shares at about US$8.00 each.
The good news, alongside the insider buying, for FNCB Bancorp bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have US$34m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 18% of the company; visible skin in the game.
While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. The cherry on top is that the CEO, Jerry Champi is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like FNCB Bancorp with market caps between US$100m and US$400m is about US$1.1m.
FNCB Bancorp offered total compensation worth US$698k to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. 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. It can also be a sign of good governance, more generally.
Should You Add FNCB Bancorp To Your Watchlist?
For growth investors like me, FNCB Bancorp's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So I do think this is one stock worth watching. You should always think about risks though. Case in point, we've spotted 1 warning sign for FNCB Bancorp you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of FNCB Bancorp, you'll probably love this free list of growing companies that insiders are buying.
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.
