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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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like ECB Bancorp (NASDAQ:ECBK). 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 ECB Bancorp
How Fast Is ECB Bancorp Growing Its Earnings Per Share?
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So EPS growth can certainly encourage an investor to take note of a stock. Impressively, ECB Bancorp's EPS catapulted from US$0.24 to US$0.45, over the last year. It's not often a company can achieve year-on-year growth of 86%.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that ECB Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. ECB Bancorp maintained stable EBIT margins over the last year, all while growing revenue 11% to US$25m. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
ECB Bancorp isn't a huge company, given its market capitalisation of US$119m. That makes it extra important to check on its balance sheet strength.
Are ECB Bancorp 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
It's worth noting that there was some insider selling of ECB Bancorp shares last year, worth US$65k. But this is outweighed by the trades from Secretary John Citrano who spent US$133k buying shares, at an average price of around US$12.05. Overall, that is something good to take away.