For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn’t suit, you might be more interested in profitable, growing companies, like OceanFirst Financial (NASDAQ:OCFC). While this doesn’t necessarily speak to whether it’s undervalued, the profitability of the business is enough to warrant some appreciation – especially if its growing.
View our latest analysis for OceanFirst Financial
OceanFirst Financial’s Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. We can see that in the last three years OceanFirst Financial grew its EPS by 17% per year. That growth rate is fairly good, assuming the company can keep it up.
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. Our analysis has highlighted that OceanFirst Financial’s revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. OceanFirst Financial maintained stable EBIT margins over the last year, all while growing revenue 18% to US$438m. That’s progress.
You can take a look at the company’s revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for OceanFirst Financial.
Are OceanFirst Financial Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don’t always get it right.
Not only did OceanFirst Financial insiders refrain from selling stock during the year, but they also spent US$198k buying it. That’s nice to see, because it suggests insiders are optimistic. Zooming in, we can see that the biggest insider purchase was by Independent Director Joseph Murphy for US$100k worth of shares, at about US$15.45 per share.
On top of the insider buying, it’s good to see that OceanFirst Financial insiders have a valuable investment in the business. Indeed, they hold US$33m worth of its stock. That’s a lot of money, and no small incentive to work hard. Even though that’s only about 3.4% 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 on our analysis the CEO, Chris Maher, is paid less than the median for similar sized companies. For companies with market capitalisations between US$400m and US$1.6b, like OceanFirst Financial, the median CEO pay is around US$3.5m.
OceanFirst Financial offered total compensation worth US$3.1m to its CEO in the year to December 2022. 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 a culture of integrity, in a broader sense.
Is OceanFirst Financial Worth Keeping An Eye On?
As previously touched on, OceanFirst Financial is a growing business, which is encouraging. On top of that, we’ve seen insiders buying shares even though they already own plenty. That should do plenty in prompting budding investors to undertake a bit more research – or even adding the company to their watchlists. What about risks? Every company has them, and we’ve spotted 1 warning sign for OceanFirst Financial you should know about.
The good news is that OceanFirst Financial 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.
