Yahoo Finance If EPS Growth Is Important To You, Coastal Financial (NASDAQ:CCB) Presents An Opportunity
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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.
In contrast to all that, many investors prefer to focus on companies like Coastal Financial (NASDAQ:CCB), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
View our latest analysis for Coastal Financial
How Quickly Is Coastal Financial Increasing Earnings Per Share?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, Coastal Financial has achieved impressive annual EPS growth of 47%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
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 Coastal Financial's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Coastal Financial remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 106% to US$239m. That's encouraging news for the company!
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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Coastal Financial's future EPS 100% free.
Are Coastal Financial Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, 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.
Although we did see some insider selling (worth US$510k) this was overshadowed by a mountain of buying, totalling US$1.4m in just one year. This adds to the interest in Coastal Financial because it suggests that those who understand the company best, are optimistic. Zooming in, we can see that the biggest insider purchase was by Independent Director Steven Hovde for US$1.1m worth of shares, at about US$37.71 per share.
Along with the insider buying, another encouraging sign for Coastal Financial is that insiders, as a group, have a considerable shareholding. Holding US$89m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. At 19% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Eric Sprink, is paid less than the median for similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Coastal Financial with market caps between US$200m and US$800m is about US$2.5m.
Coastal Financial offered total compensation worth US$2.0m to its CEO in the year to December 2022. That seems pretty reasonable, especially given it's below the median for similar 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Is Coastal Financial Worth Keeping An Eye On?
Coastal Financial's earnings per share have been soaring, with growth rates sky high. What's more, insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Coastal Financial deserves timely attention. Before you take the next step you should know about the 1 warning sign for Coastal Financial that we have uncovered.
Keen growth investors love to see insider buying. Thankfully, Coastal Financial 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.
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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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