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.  Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals.  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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like CrossFirst Bankshares (NASDAQ:CFB). 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.

How Fast Is CrossFirst Bankshares Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes.  That means EPS growth is considered a real positive by most successful long-term investors.   CrossFirst Bankshares' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 51%.  Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.  

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.   Not all of CrossFirst Bankshares' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business.     While we note CrossFirst Bankshares achieved similar EBIT margins to last year, revenue grew by a solid 12% to US$233m.  That's encouraging news for the company!  

In the chart below, you can see how the company has grown earnings and revenue, over time.  For finer detail, click on the image.

NasdaqGS:CFB Earnings and Revenue History April 17th 2024

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 CrossFirst Bankshares.

Are CrossFirst Bankshares Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market.  Shareholders will be pleased by the fact that insiders own CrossFirst Bankshares shares worth a considerable sum.     As a matter of fact, their holding is valued at US$38m.  This considerable investment should help drive long-term value in the business.   As a percentage, this totals to 6.1% of the shares on issue for the business, an appreciable amount considering the market cap.  

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest.  A brief analysis of the CEO compensation suggests they are.    The median total compensation for CEOs of companies similar in size to CrossFirst Bankshares, with market caps between US$400m and US$1.6b, is around US$3.4m.  

CrossFirst Bankshares offered total compensation worth US$1.9m to its CEO in the year to December 2023.  That seems pretty reasonable, especially given it's below the median for similar sized companies.   CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests.  Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does CrossFirst Bankshares Deserve A Spot On Your Watchlist?

CrossFirst Bankshares' earnings have taken off in quite an impressive fashion.   The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable.  The sharp increase in earnings could signal good business momentum.  Big growth can make big winners, so the writing on the wall tells us that CrossFirst Bankshares is worth considering carefully.     Of course, just because CrossFirst Bankshares is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.  

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.