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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Bendigo and Adelaide Bank (ASX:BEN), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Bendigo and Adelaide Bank with the means to add long-term value to shareholders.
How Quickly Is Bendigo and Adelaide Bank 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 makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Bendigo and Adelaide Bank's EPS has grown 19% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of Bendigo and Adelaide Bank'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. EBIT margins for Bendigo and Adelaide Bank remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.2% to AU$1.8b. 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.
Are Bendigo and Adelaide Bank 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
The good news for Bendigo and Adelaide Bank shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that David Foster, the Independent Director (Leave of Absence) of the company, paid AU$35k for shares at around AU$9.50 each. It seems that at least one insider is prepared to show the market there is potential within Bendigo and Adelaide Bank.
Along with the insider buying, another encouraging sign for Bendigo and Adelaide Bank is that insiders, as a group, have a considerable shareholding. Indeed, they hold AU$26m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.4% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because Bendigo and Adelaide Bank's CEO, Marnie Baker, is paid at a relatively modest level when compared to other CEOs for companies of this size. The median total compensation for CEOs of companies similar in size to Bendigo and Adelaide Bank, with market caps between AU$3.1b and AU$9.8b, is around AU$3.4m.
Bendigo and Adelaide Bank's CEO took home a total compensation package worth AU$2.6m in the year leading up to June 2023. That is actually below the median for CEO's of similarly sized companies. 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 Bendigo and Adelaide Bank Worth Keeping An Eye On?
For growth investors, Bendigo and Adelaide Bank's raw rate of earnings growth is a beacon in the night. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. What about risks? Every company has them, and we've spotted 2 warning signs for Bendigo and Adelaide Bank you should know about.
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.
