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Does Texas Community Bancshares (NASDAQ:TCBS) Deserve A Spot On Your Watchlist?

·4-min read

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Texas Community Bancshares (NASDAQ:TCBS). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Texas Community Bancshares

Texas Community Bancshares' Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Texas Community Bancshares' EPS skyrocketed from US$0.19 to US$0.30, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 60%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Texas Community Bancshares' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Texas Community Bancshares remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 14% to US$11m. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
earnings-and-revenue-history

Since Texas Community Bancshares is no giant, with a market capitalisation of US$47m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Texas Community Bancshares 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Not only did Texas Community Bancshares insiders refrain from selling stock during the year, but they also spent US$68k buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. We also note that it was the Independent Director, James Harder, who made the biggest single acquisition, paying US$32k for shares at about US$15.91 each.

Recent insider purchases of Texas Community Bancshares stock is not the only way management has kept the interests of the general public shareholders in mind. To be specific, the CEO is paid modestly when compared to company peers of the same size. Our analysis has discovered that the median total compensation for the CEOs of companies like Texas Community Bancshares with market caps under US$200m is about US$760k.

The Texas Community Bancshares CEO received US$421k in compensation for the year ending December 2021. That is actually below the median for CEO's of similarly sized companies. 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 good governance, more generally.

Does Texas Community Bancshares Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Texas Community Bancshares' strong EPS growth. And that's not the only positive either. We have both insider buying and reasonable and remuneration to consider. On balance the message seems to be that this stock is worth looking at, at least for a while. You should always think about risks though. Case in point, we've spotted 1 warning sign for Texas Community Bancshares you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Texas Community Bancshares 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.

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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