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If You Like EPS Growth Then Check Out Atlantic Capital Bancshares (NASDAQ:ACBI) Before It's Too Late
Simply Wall St
4 min read
Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Atlantic Capital Bancshares (NASDAQ:ACBI). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Atlantic Capital Bancshares's Earnings Per Share Are Growing.
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). That means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud Atlantic Capital Bancshares's stratospheric annual EPS growth of 44%, compound, over the last three years? Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. I note that Atlantic Capital Bancshares's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Atlantic Capital Bancshares's EBIT margins were flat over the last year, revenue grew by a solid 17% to US$96m. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
NasdaqGS:ACBI Earnings and Revenue History July 13th 2021
Are Atlantic Capital Bancshares Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Any way you look at it Atlantic Capital Bancshares shareholders can gain quiet confidence from the fact that insiders shelled out US$406k to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to brim with joyful expectancy. Zooming in, we can see that the biggest insider purchase was by Independent Director Thomas Holder for US$206k worth of shares, at about US$20.59 per share.
The good news, alongside the insider buying, for Atlantic Capital Bancshares bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$21m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 4.2% 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, Doug Williams, is paid less than the median for similar sized companies. I discovered that the median total compensation for the CEOs of companies like Atlantic Capital Bancshares with market caps between US$200m and US$800m is about US$1.7m.
Atlantic Capital Bancshares offered total compensation worth US$899k to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Does Atlantic Capital Bancshares Deserve A Spot On Your Watchlist?
Atlantic Capital Bancshares's earnings per share have taken off like a rocket aimed right at the moon. Just as heartening; insiders both own and are buying more stock. Because of the potential that it has reached an inflection point, I'd suggest Atlantic Capital Bancshares belongs on the top of your watchlist. Of course, just because Atlantic Capital Bancshares is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
This article by Simply Wall St is general in nature. 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.
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