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Does First Seacoast Bancorp (NASDAQ:FSEA) Deserve A Spot On Your Watchlist?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like First Seacoast Bancorp (NASDAQ:FSEA). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 First Seacoast Bancorp

How Fast Is First Seacoast Bancorp 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 no surprise that some investors are more inclined to invest in profitable businesses. It is therefore awe-striking that First Seacoast Bancorp's EPS went from US$0.054 to US$0.35 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that First Seacoast Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. First Seacoast Bancorp maintained stable EBIT margins over the last year, all while growing revenue 11% to US$16m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

earnings-and-revenue-history
earnings-and-revenue-history

Since First Seacoast Bancorp is no giant, with a market capitalization of US$56m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are First Seacoast Bancorp Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

First Seacoast Bancorp top brass are certainly in sync, not having sold any shares, over the last year. But my excitement comes from the US$51k that Richard Donovan spent buying shares (at an average price of about US$9.57).

I do like that insiders have been buying shares in First Seacoast Bancorp, but there is more evidence of shareholder friendly management. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalizations under US$200m, like First Seacoast Bancorp, the median CEO pay is around US$545k.

The First Seacoast Bancorp CEO received total compensation of just US$272k in the year to . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.

Is First Seacoast Bancorp Worth Keeping An Eye On?

First Seacoast Bancorp's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. Better yet, we can observe insider buying and the chief executive pay looks reasonable. It could be that First Seacoast Bancorp is at an inflection point, given the EPS growth. If so, then it the potential for further gains probably merit a spot on your watchlist. Before you take the next step you should know about the 1 warning sign for First Seacoast Bancorp that we have uncovered.

As a growth investor I do like to see insider buying. But First Seacoast Bancorp isn't the only one. You can see a a free list of them here.

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. 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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