Yahoo Finance Should You Be Adding National Bankshares (NASDAQ:NKSH) To Your Watchlist Today?
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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
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 National Bankshares (NASDAQ:NKSH). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for National Bankshares
National Bankshares' Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. National Bankshares managed to grow EPS by 13% per year, over three years. That's a good rate of growth, if it can be sustained.
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. Our analysis has highlighted that National Bankshares' revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note National Bankshares achieved similar EBIT margins to last year, revenue grew by a solid 6.2% to US$53m. 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.
Fortunately, we've got access to analyst forecasts of National Bankshares' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are National Bankshares Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.
Not only did National Bankshares insiders refrain from selling stock during the year, but they also spent US$137k buying it. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Independent Director, John Dooley, who made the biggest single acquisition, paying US$35k for shares at about US$35.25 each.
It's reassuring that National Bankshares insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Specifically, the CEO is paid quite reasonably for a company of this size. The median total compensation for CEOs of companies similar in size to National Bankshares, with market caps between US$100m and US$400m, is around US$1.7m.
National Bankshares' CEO took home a total compensation package worth US$1.0m in the year leading up to December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Does National Bankshares Deserve A Spot On Your Watchlist?
One important encouraging feature of National Bankshares is that it is growing profits. And there's more to National Bankshares, with the insider buying and modest CEO pay being a great look for those with an eye on the company. If these factors aren't enough to secure National Bankshares a spot on the watchlist, then it certainly warrants a closer look at the very least. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of National Bankshares.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of National 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.
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.
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