It’s common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’ While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like HBT Financial (NASDAQ:HBT). While profit isn’t the sole metric that should be considered when investing, it’s worth recognising businesses that can consistently produce it.
Check out our latest analysis for HBT Financial
HBT Financial’s Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. HBT Financial managed to grow EPS by 11% 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. It’s noted that HBT Financial’s revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. HBT Financial maintained stable EBIT margins over the last year, all while growing revenue 13% to US$217m. That’s a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for HBT Financial.
Are HBT Financial Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That’s because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.
It’s good to see HBT Financial insiders walking the walk, by spending US$420k on shares in just twelve months. When you contrast that with the complete lack of sales, it’s easy for shareholders to be brimming with joyful expectancy. Zooming in, we can see that the biggest insider purchase was by Independent Director Eric Burwell for US$114k worth of shares, at about US$18.99 per share.
On top of the insider buying, we can also see that HBT Financial insiders own a large chunk of the company. To be exact, company insiders hold 60% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term – a positive for shareholders with a sit and hold strategy. This insider holding amounts to This is an incredible endorsement from them.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, J. Carter is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to HBT Financial, with market caps between US$400m and US$1.6b, is around US$3.3m.
HBT Financial’s CEO took home a total compensation package of US$1.0m in the year prior to December 2023. That’s clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. While the level of CEO compensation shouldn’t be the biggest factor in how the company is viewed, 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 HBT Financial To Your Watchlist?
One positive for HBT Financial is that it is growing EPS. That’s nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for your watchlist – and arguably a research priority. We should say that we’ve discovered 2 warning signs for HBT Financial (1 shouldn’t be ignored!) that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of HBT Financial, you’ll probably love this curated collection of companies in the US that have an attractive valuation alongside insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
Credit: Source link
