The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’ Loss making companies can act like a sponge for capital – so investors should be cautious that they’re not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Texas Capital Bancshares (NASDAQ:TCBI), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
See our latest analysis for Texas Capital Bancshares
How Fast Is Texas Capital Bancshares Growing Its Earnings Per Share?
Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it’s easy to see why many investors focus in on EPS growth. Texas Capital Bancshares’ EPS skyrocketed from US$4.65 to US$6.32, in just one year; a result that’s bound to bring a smile to shareholders. That’s a commendable gain of 36%.
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. It’s noted that Texas Capital Bancshares’ revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Texas Capital Bancshares maintained stable EBIT margins over the last year, all while growing revenue 24% to US$1.2b. That’s progress.
You can take a look at the company’s revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Texas Capital Bancshares.
Are Texas Capital Bancshares Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That’s because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don’t always get it right.
It’s pleasing to note that insiders spent US$8.6m buying Texas Capital Bancshares shares, over the last year, without reporting any share sales whatsoever. The shareholders within the general public should find themselves expectant and certainly hopeful, that this large outlay signals prescient optimism for the business. We also note that it was the Independent Director, Robert Stallings, who made the biggest single acquisition, paying US$2.4m for shares at about US$56.57 each.
The good news, alongside the insider buying, for Texas Capital Bancshares bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have US$48m worth of shares. That’s a lot of money, and no small incentive to work hard. Even though that’s only about 1.5% of the company, it’s enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Does Texas Capital Bancshares Deserve A Spot On Your Watchlist?
For growth investors, Texas Capital Bancshares’ raw rate of earnings growth is a beacon in the night. Furthermore, company insiders have been adding to their significant stake in the company. These things considered, this is one stock worth watching. Before you take the next step you should know about the 1 warning sign for Texas Capital Bancshares that we have uncovered.
The good news is that Texas Capital Bancshares is not the only growth stock with insider buying. Here’s a list of them… with insider buying in the last three months!
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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