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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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 Sterling Bancorp (NYSE:STL). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
See our latest analysis for Sterling Bancorp
How Fast Is Sterling Bancorp Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Who among us would not applaud Sterling Bancorp's stratospheric annual EPS growth of 49%, 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.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of Sterling Bancorp's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Sterling Bancorp maintained stable EBIT margins over the last year, all while growing revenue 38% to US$1.0b. That's progress.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Sterling Bancorp's forecast profits?
Are Sterling Bancorp Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Sterling Bancorp insiders have a significant amount of capital invested in the stock. Given insiders own a small fortune of shares, currently valued at US$83m, they have plenty of motivation to push the business to succeed. That's certainly enough to make me think that management will be very focussed on long term growth.