Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Fauquier Bankshares (NASDAQ:FBSS). 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.
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Fauquier Bankshares's Improving Profits
Over the last three years, Fauquier Bankshares has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, Fauquier Bankshares's EPS shot from US$0.88 to US$1.64, over the last year. You don't see 86% year-on-year growth like that, very often.
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. I note that Fauquier Bankshares's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Fauquier Bankshares maintained stable EBIT margins over the last year, all while growing revenue 7.8% to US$29m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Since Fauquier Bankshares is no giant, with a market capitalization of US$82m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Fauquier Bankshares Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
We haven't seen any insiders selling Fauquier Bankshares shares, in the last year. So it's definitely nice that Director Donna Flory bought US$5.7k worth of shares at an average price of around US$21.62.
Does Fauquier Bankshares Deserve A Spot On Your Watchlist?
Fauquier Bankshares's earnings per share growth has been so hot recently that thinking about it is making me blush. Growth investors should find it difficult to look past that strong EPS move. And in fact, it could well signal a fundamental shift in the business economics. For me, this situation certainly piques my interest. Now, you could try to make up your mind on Fauquier Bankshares by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Fauquier Bankshares, 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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.