Yahoo Finance Do Old Second Bancorp's (NASDAQ:OSBC) Earnings Warrant Your Attention?
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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
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 Old Second Bancorp (NASDAQ:OSBC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Old Second Bancorp with the means to add long-term value to shareholders.
Check out our latest analysis for Old Second Bancorp
Old Second Bancorp's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Old Second Bancorp has grown EPS by 14% per year. That's a good rate of growth, if it can be sustained.
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. Our analysis has highlighted that Old Second Bancorp's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. EBIT margins for Old Second Bancorp remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 4.5% to US$268m. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of Old Second Bancorp's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Old Second Bancorp Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Old Second Bancorp shares worth a considerable sum. To be specific, they have US$23m worth of shares. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 3.6%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
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. For companies with market capitalisations between US$400m and US$1.6b, like Old Second Bancorp, the median CEO pay is around US$3.4m.
Old Second Bancorp offered total compensation worth US$2.3m to its CEO in the year to December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Should You Add Old Second Bancorp To Your Watchlist?
As previously touched on, Old Second Bancorp is a growing business, which is encouraging. The growth of EPS may be the eye-catching headline for Old Second Bancorp, but there's more to bring joy for shareholders. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. Before you take the next step you should know about the 2 warning signs for Old Second Bancorp (1 is a bit unpleasant!) that we have uncovered.
Although Old Second Bancorp certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
