Investing in loss-making companies with a good story may seem tempting, but it often leads to disappointing results for inexperienced investors. Instead, it is crucial to consider the profitability of a company when making investment decisions. SmartFinancial (NASDAQ:SMBK), a profitable company, presents a compelling investment opportunity.
Over the past three years, SmartFinancial has experienced a remarkable compound annual growth rate of 21% in its earnings per share (EPS). This growth is indicative of the company’s ability to generate sustainable profits, making it an attractive choice for shareholders. Additionally, SmartFinancial’s revenue has increased by 13% to reach US$167 million, further demonstrating its strong performance in the market.
It is worth noting that not all of SmartFinancial’s revenue is solely from operations, so the revenue and margin numbers discussed in this article may not fully represent the underlying business. However, the company’s high earnings before interest and taxation (EBIT) margin, coupled with its consistent revenue growth, indicate a competitive advantage in the market.
Insider buying is often seen as a positive signal, as it demonstrates confidence in the company’s prospects. In the case of SmartFinancial, insiders have invested an additional US$607,000 in the company, indicating their belief in its long-term success. Furthermore, the substantial investment of US$60 million by insiders, accounting for 16% of the company’s value, instills confidence in the management’s decision-making.
While CEO compensation is not the most crucial factor to consider, it is worth noting that the CEO of SmartFinancial receives a modest total compensation of US$1.0 million, significantly below the average for companies of similar size. This suggests a shareholder-friendly culture and good governance within the company.
Overall, SmartFinancial’s strong earnings growth, insider ownership, and modest CEO compensation make it an investment worthy of consideration. However, it is essential to conduct thorough research and consider all factors before making any investment decisions.
Definitions:
– EPS: Earnings per share is a financial metric that calculates a company’s profitability by dividing its net income by the number of outstanding shares.
– EBIT margin: The earnings before interest and taxation (EBIT) margin is a profitability ratio that measures a company’s operating margin before accounting for interest and taxes.
– Insider buying: When individuals within a company purchase shares of its stock, it is considered insider buying and often signifies confidence in the company’s future performance.
– CEO compensation: The total compensation received by a company’s CEO, including salary, bonuses, and other benefits.
– Shareholder-friendly culture: A corporate culture that prioritizes the interests of shareholders, often characterized by transparency, good governance, and fair treatment of shareholders.
Sources:
– Simply Wall St. (2022). SmartFinancial (NASDAQ:SMBK) Could Be A Buy For Its Upcoming Dividend. https://simplywall.st/stocks/us/banks/nasdaq-smbk/smartfinancial/news/smartfinancial-nasdaqsmbk-could-be-a-buy-for-its-upcoming-dividend
– Investopedia. (n.d.). Earnings per Share (EPS). https://www.investopedia.com/terms/e/eps.asp
– Investopedia. (n.d.). Earnings Before Interest and Taxes – EBIT. https://www.investopedia.com/terms/e/ebit.asp
– Investopedia. (n.d.). Insider Buying. https://www.investopedia.com/terms/i/insider-buying.asp
– Investopedia. (n.d.). CEO Compensation. https://www.investopedia.com/terms/c/ceo-compensation.asp