It is common for many investors, especially those who are inexperienced, to buy shares in companies that have a good history, even if those companies are loss-making. But the reality is that when a company loses money every year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always in a race against time to achieve financial viability, so investors in these companies may take on more risk than they should.
If this type of business isn’t your style, and you like businesses that generate revenue or even profit, then you might be interested in Texas Community Bancshares (NASDAQ: TCBS). While that doesn’t necessarily mean it’s undervalued, the company’s profitability is enough to warrant some appreciation, especially if it’s growing.
Check out our latest analysis for Texas Community Bancshares
Texas Community Bancshares Earnings Improvement
Even with very modest growth rates, a company will generally do well if it improves its earnings per share (EPS) year after year. It is therefore not surprising that some investors are more inclined to invest in profitable companies. Texas Community Bancshares’ EPS soared from $0.19 to $0.30 in just one year; a result that is sure to make shareholders smile. That’s a fantastic 60% gain.
It’s often helpful to look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another idea of the quality of the company’s growth. Not all Texas Community Bancshares revenue this year is revenue operations, so keep in mind that the revenue and margin figures used in this article may not be the best representation of the underlying business. Texas Community Bancshares’ EBIT margins were virtually unchanged over the past year, but the company should be pleased to report revenue growth for the period of 14% to $11 million. This is encouraging news for the company!
In the table below, you can see how the company has increased its profits and revenue over time. Click on the table to see the exact numbers.
Since Texas Community Bancshares is not a giant, with a market capitalization of $47 million, you should definitely check its cash and debt. before getting too excited about his prospects.
Are Texas Community Bancshares Insiders Aligned with All Shareholders?
Investors are always looking for a vote of confidence in the companies they own and insider buying is one of the main indicators of optimism in the market. Because often buying stocks is a sign that the buyer considers them undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Not only did Texas Community Bancshares insiders refrain from selling shares during the year, they also spent US$68,000 to buy them. This presents the company in a pleasant light, as it indicates that its leaders feel confident about the direction the company is taking. We also note that it was independent director James Harder who made the largest single acquisition, paying $32,000 for shares at around $15.91 each.
Recent insider buying of Texas Community Bancshares stock isn’t the only way management has kept the interests of mainstream shareholders in mind. To be precise, the CEO is paid modestly compared to his peers of the same size. Our analysis found that the median total compensation for CEOs of companies like Texas Community Bancshares with market caps below $200 million is around $760,000.
The CEO of Texas Community Bancshares received US$421,000 in compensation for the year ending December 2021. That’s actually lower than the median for CEOs of similar-sized companies. CEO compensation isn’t the most important aspect of a company to consider, but when it’s reasonable, it gives a little more confidence that executives are looking after shareholders’ interests. It can also be a sign of good governance more generally.
Does Texas Community Bancshares deserve a spot on your watchlist?
If you think stock price tracks earnings per share, you should definitely dig into Texas Community Bancshares’ strong EPS growth. And that’s not the only plus point either. We have both insider buying and reasonable compensation to consider. Overall, the message seems to be that this stock is worth looking at, at least for a while. However, you should always think about the risks. Concrete example, we spotted 1 warning sign for Texas Community Bancshares you should be aware.
Passionate growth investors like to see insider buying. Fortunately, Texas Community Bancshares is not alone. You can see a free list of them here.
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.
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