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.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Penns Woods Bancorp (NASDAQ:PWOD). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Penns Woods Bancorp with the means to add long-term value to shareholders.
Check out our latest analysis for Penns Woods Bancorp
How Fast Is Penns Woods Bancorp Growing Its Earnings Per Share?
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 easy to see why many investors focus in on EPS growth. Penns Woods Bancorp has grown its trailing twelve month EPS from US$2.27 to US$2.47, in the last year. That's a fair increase of 8.7%.
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 Penns Woods Bancorp's 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. While we note Penns Woods Bancorp achieved similar EBIT margins to last year, revenue grew by a solid 6.3% to US$65m. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Since Penns Woods Bancorp is no giant, with a market capitalisation of US$190m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Penns Woods Bancorp 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Shareholders in Penns Woods Bancorp will be more than happy to see insiders committing themselves to the company, spending US$280k on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. Zooming in, we can see that the biggest insider purchase was by CEO & Director Richard Grafmyre for US$59k worth of shares, at about US$23.45 per share.
It's reassuring that Penns Woods Bancorp 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 Penns Woods Bancorp, with market caps between US$100m and US$400m, is around US$1.6m.
The Penns Woods Bancorp CEO received US$1.4m in compensation for the year ending December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. 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.
Is Penns Woods Bancorp Worth Keeping An Eye On?
One important encouraging feature of Penns Woods Bancorp is that it is growing profits. And that's not all. We've also seen insiders buying stock, and noted modest executive pay. All things considered, Penns Woods Bancorp is certainly displaying its merits and is worthy of taking research to the next step. If you think Penns Woods Bancorp might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.
The good news is that Penns Woods Bancorp is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
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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