U.S. markets closed
  • S&P 500

    4,166.45
    -55.41 (-1.31%)
     
  • Dow 30

    33,290.08
    -533.37 (-1.58%)
     
  • Nasdaq

    14,030.38
    -130.97 (-0.92%)
     
  • Russell 2000

    2,237.75
    -49.71 (-2.17%)
     
  • Crude Oil

    71.50
    +0.46 (+0.65%)
     
  • Gold

    1,763.90
    -10.90 (-0.61%)
     
  • Silver

    25.84
    -0.01 (-0.04%)
     
  • EUR/USD

    1.1865
    -0.0045 (-0.38%)
     
  • 10-Yr Bond

    1.4500
    -0.0610 (-4.04%)
     
  • GBP/USD

    1.3809
    -0.0115 (-0.83%)
     
  • USD/JPY

    110.1500
    -0.0810 (-0.07%)
     
  • BTC-USD

    35,711.17
    -1,952.51 (-5.18%)
     
  • CMC Crypto 200

    889.10
    -50.84 (-5.41%)
     
  • FTSE 100

    7,017.47
    -135.96 (-1.90%)
     
  • Nikkei 225

    28,964.08
    -54.25 (-0.19%)
     

Do Veritex Holdings's (NASDAQ:VBTX) Earnings Warrant Your Attention?

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

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 Veritex Holdings (NASDAQ:VBTX). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Veritex Holdings

How Fast Is Veritex Holdings Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Veritex Holdings managed to grow EPS by 12% per year, over three years. That's a pretty good rate, if the company can sustain it.

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 Veritex Holdings'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 Veritex Holdings's EBIT margins were flat over the last year, revenue grew by a solid 120% to US$251m. That's progress.

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:VBTX Income Statement, December 17th 2019
NasdaqGM:VBTX Income Statement, December 17th 2019

Fortunately, we've got access to analyst forecasts of Veritex Holdings's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Veritex Holdings Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Although we did see some insider selling (worth -US$421.4k) this was overshadowed by a mountain of buying, totalling US$1.7m in just one year. I find this encouraging because it suggests they are optimistic about the Veritex Holdings's future. It is also worth noting that it was Independent Director Mark Griege who made the biggest single purchase, worth US$650k, paying US$26.00 per share.

On top of the insider buying, it's good to see that Veritex Holdings insiders have a valuable investment in the business. Indeed, they hold US$49m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 3.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

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, Charles Holland, is paid less than the median for similar sized companies. I discovered that the median total compensation for the CEOs of companies like Veritex Holdings with market caps between US$1.0b and US$3.2b is about US$3.9m.

The Veritex Holdings CEO received total compensation of just US$1m 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 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. I'd also argue reasonable pay levels attest to good decision making more generally.

Is Veritex Holdings Worth Keeping An Eye On?

One positive for Veritex Holdings is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Now, you could try to make up your mind on Veritex Holdings by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

As a growth investor I do like to see insider buying. But Veritex Holdings 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

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.

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. Thank you for reading.