For starters, it might seem like a good idea (and an exciting prospect) to buy a company that tells investors a good story, even if it completely lacks a track record of revenue and earnings. But as Warren Buffett said, “If you’ve been playing poker for half an hour and you still don’t know who the sucker is, you’re the sucker.” When buying such stocks, investors are too often suckers.
So if you’re like me, you might be more interested in profitable and growing companies, like Business Financial Services (NASDAQ:EFSC). While that doesn’t make stocks worth buying at any price, you can’t deny that successful capitalism ultimately requires profits. While a well-funded business may suffer losses for years, unless its owners have an endless appetite to subsidize the customer, it will eventually have to turn a profit, or else breathe its last breath.
Check out our latest analysis for corporate financial services
How fast is corporate financial services growing earnings per share?
Even modest earnings per share (EPS) growth can create significant value, when reliably sustained year over year. It is therefore not surprising that some investors are more inclined to invest in profitable companies. Enterprise Financial Services increased its year-over-year EPS from US$3.25 to US$4.02 over the past year. I doubt many will complain about that 24% gain.
A careful look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. I see that Enterprise Financial Services revenue operations was lower than its turnover over the last twelve months, which could distort my analysis of its margins. While we note that Enterprise Financial Services’ EBIT margins have remained flat over the past year, revenues have grown 52% to $440 million. This is a real plus point.
You can check the company’s revenue and profit growth trend in the table below. Click on the table to see the exact numbers.
As we live in the moment at all times, there is no doubt in my mind that the future matters more than the past. So why not check out this interactive chart outlining future EPS estimates for corporate financial services?
Are corporate financial services insiders aligned with all shareholders?
I feel safer owning stock in a company if insiders also own stock, thereby aligning our interests more closely. Accordingly, I am encouraged that insiders hold shares of Enterprise Financial Services of considerable value. With a whopping $66 million in stock as a group, insiders have a lot to do with the company’s success. This should keep them focused on creating long-term shareholder value.
It means a lot to see insiders invested in the company, but I wonder if the compensation policies are shareholder-friendly. Well, based on the CEO’s salary, I’d say they are indeed. For companies with a market capitalization between $1.0 billion and $3.2 billion, such as Enterprise Financial Services, the median CEO salary is around $5.4 million.
The CEO of Enterprise Financial Services received total compensation of just US$2.5 million in the year at . This seems to me to be a modest remuneration, and can suggest a certain respect for the interests of the shareholders. CEO compensation isn’t the most important aspect of a company to consider, but when it’s reasonable, it gives me a bit more confidence that executives are looking out for shareholders’ interests. It can also be a sign of a culture of integrity, broadly defined.
Should you add corporate financial services to your watch list?
As I mentioned before, Enterprise Financial Services is a growing company, and that’s what I like to see. The fact that EPS is growing is a real boon for corporate financial services, but the pretty picture is better than that. Boasting both a modest CEO salary and considerable insider ownership, I’d say this one deserves at least the watch list. You should always take note of the risks, for example – Enterprise Financial Services has 1 warning sign we think you should know.
While corporate finance certainly looks good to me, I’d rather have insiders buying stocks. If you also like to see insiders buy, then this free list of growing companies that insiders are buying might be exactly what you are looking for.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.