Nasdaq Today – Here’s Why We Think Home Federal Bancorp of Louisiana (NASDAQ:HFBL) Is Well Worth Watching
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. 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.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Home Federal Bancorp of Louisiana (NASDAQ:HFBL). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
View our latest analysis for Home Federal Bancorp of Louisiana
How Fast Is Home Federal Bancorp of Louisiana Growing?
As one of my mentors once told me, share price follows earnings per share (EPS). It’s no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Home Federal Bancorp of Louisiana grew its EPS by 17% per year. That growth rate is fairly good, assuming the company can keep it up.
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 Home Federal Bancorp of Louisiana’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. While we note Home Federal Bancorp of Louisiana’s EBIT margins were flat over the last year, revenue grew by a solid 14% to US$19m. That’s progress.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
Since Home Federal Bancorp of Louisiana is no giant, with a market capitalization of US$50m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Home Federal Bancorp of Louisiana 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, small purchases are not always indicative of conviction, and insiders don’t always get it right.
The good news for Home Federal Bancorp of Louisiana shareholders is that no insiders reported selling shares in the last year. With that in mind, it’s heartening that Scott Lawrence, the Independent Director of the company, paid US$37k for shares at around US$15.62 each.
On top of the insider buying, it’s good to see that Home Federal Bancorp of Louisiana insiders have a valuable investment in the business. Indeed, they hold US$13m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 27% of the company; visible skin in the game.
Should You Add Home Federal Bancorp of Louisiana To Your Watchlist?
One important encouraging feature of Home Federal Bancorp of Louisiana is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist – and arguably a research priority. It’s still necessary to consider the ever-present spectre of investment risk. We’ve identified 2 warning signs with Home Federal Bancorp of Louisiana , and understanding these should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Home Federal Bancorp of Louisiana, you’ll probably love this free list of growing companies that insiders are buying.
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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