Some have more money than common sense, they say, so even companies with no income, no profit, and a history of default can easily find investors. Unfortunately, high-risk investments are often unlikely to pay off, and many investors pay a price to learn their lesson.
In the age of investing in the blue sky of tech stocks, my choice may seem old-fashioned; I always prefer profitable businesses like New York Community Bancorp (NYSE: NYCB). Now, I’m not saying the stock is necessarily undervalued today; but I cannot shake an appreciation of the profitability of the company itself. Loss-making businesses always race against time to achieve financial viability, but time is often the friend of the profitable business, especially if it is growing.
See our latest analysis for New York Community Bancorp
How Fast is New York Community Bancorp Growing Earnings Per Share?
The market is a short-term voting machine, but a long-term weighing machine, so the stock price eventually follows earnings per share (EPS). So it’s no surprise that I like to invest in companies with growing EPS. Over the past three years, New York Community Bancorp has increased its EPS by 8.1% per year. It’s a good rate of growth, if it can be sustained.
I like to see revenue growth as an indication that growth is sustainable, and I look for a high profit margin before interest and taxes (EBIT) to indicate a competitive gap (although some low-margin companies also have ditches). Not all New York Community Bancorp income this year is income operationsSo keep in mind that the revenue and margin numbers I used may not be the best representation of the underlying business. New York Community Bancorp has maintained stable EBIT margins over the past year, while increasing revenues by 18% to US $ 1.2 billion. It is progress.
In the graph below, you can see how the business has increased its profit and revenue over time. For more details, click on the image.
You don’t drive with your eyes on the rearview mirror so you might be more interested in this free report showing analyst forecasts for New York Community Bancorp’s future profits.
Are New York Community Bancorp Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains come, insider buying fills me with optimistic anticipation. Indeed, insider buying often indicates that those closest to the company are confident that the stock price will perform well. Small purchases aren’t always a sign of conviction, however, and insiders don’t always get it right.
New York Community Bancorp’s senior executives are certainly in sync, having sold no shares, over the past year. But the biggest problem is that independent director Ronald Rosenfeld paid US $ 53,000 to buy shares at an average price of US $ 10.63.
The good news, along with insider buying, for New York Community Bancorp bulls is that insiders (collectively) have a significant investment in the stock. Indeed, they have invested a sparkling mountain of wealth, currently valued at US $ 186 million. I would find that kind of skin in the game quite encouraging, if I owned any stock, as it would ensure that the executives of the company would also experience my success, or failure, with the action.
While insiders are apparently happy to own and accumulate stock, that’s only part of the pretty picture. That’s because, according to our analysis, CEO Tom Cangemi is paid less than the median of companies of similar size. For companies with a market cap between $ 4.0 billion and $ 12 billion, like New York Community Bancorp, the median CEO salary is around $ 6.6 million.
The CEO of New York Community Bancorp received only US $ 2.7 million in total compensation for the year ending. This is clearly well below par, so at first glance this arrangement seems generous to shareholders and indicates a culture of modest compensation. While the CEO’s pay level is not a huge factor in my opinion of the company, modest pay is a plus, as it suggests that the board has shareholders’ interests in mind. It can also be a sign of a culture of integrity, in the broad sense.
Does New York Community Bancorp deserve a spot on your watchlist?
An important and encouraging feature of New York Community Bancorp is that it increases its profits. Better yet, insiders are large shareholders and have bought more shares. This makes the company a prime candidate for my watchlist – and arguably a research priority. However, before you get too excited, we found out 1 warning sign for New York Community Bancorp of which you should be aware.
As a growth investor, I like to see insider buying. But the New York Community Bancorp is not alone. You can see a free list here.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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