Should you add Provident Financial Services (NYSE: PFS) to your watchlist today?
For newbies, it might seem like a good idea (and an exciting prospect) to buy a business that tells investors a good story, even if it lacks a history of revenue and profit altogether. But as Peter Lynch put it in One Up on Wall Street, ‘Long shots hardly ever pay off.’
If, on the other hand, you like businesses that have revenue, and even profits, then you might be interested in Provident financial services (NYSE: PFS). Even if stocks are fully valued today, most capitalists would recognize its benefits as a demonstration of constant value generation. While a well-funded business can suffer losses for years, unless its owners have an endless appetite to subsidize the customer, it will eventually have to generate a profit, or else take its last breath.
How fast is Provident Financial Services increasing earnings per share?
If you think the markets are even vaguely efficient, then in the long run you would expect a company’s stock price to follow its earnings per share (EPS). This means that growing EPS is seen as a real benefit by most successful long-term investors. Provident Financial Services has managed to increase its EPS by 14% per year, over three years. It’s a great rate, if the company can keep it up.
One way to recheck a business’s growth is to look at how its income and profit before interest and tax (EBIT) have changed. Not all Provident Financial Services income this year is income. operations, so keep in mind that the revenue and margin numbers I used might not be the best representation of the underlying business. Provident Financial Services has maintained stable EBIT margins over the past year, while increasing revenues by 40% to US $ 457 million. It’s really positive.
The graph below shows how the company’s bottom line has progressed over time. For more details, click on the image.
NYSE: PFS Profit and Revenue History September 22, 2021
Of course, the chic is to find stocks that have their best days in the future, not in the past. You can of course base your opinion on past performance, but you can also check out this interactive chart of Professional Analyst EPS Forecasts for Provident Financial Services.
Are Provident Financial Services insiders aligned with all shareholders?
I feel more secure owning shares in a company if insiders also own shares, thereby aligning our interests more closely. Accordingly, I am encouraged that insiders own shares of Provident Financial Services of considerable value. Since insiders own a small fortune of stocks, currently valued at $ 64 million, they have a lot of motivation to push the company to succeed. This should keep them focused on creating long-term shareholder value.
It’s good to see insiders invested in the company, but are the pay levels reasonable? A brief analysis of CEO compensation suggests they are. I’ve found that the median total compensation of CEOs of companies like Provident Financial Services with a market cap between $ 1.0 billion and $ 3.2 billion is around $ 3.7 million.
Provident Financial Services offered total compensation worth US $ 2.9 million to its CEO during the year to. Sounds reasonable enough, especially considering it is below the median for companies of similar size. While the level of CEO compensation is not a big factor in my view of the company, modest compensation is positive because it suggests that the board has the interests of shareholders in mind. It can also be a sign of a culture of integrity, in the broad sense.
Does Provident Financial Services deserve a spot on your watchlist?
A positive point for Provident Financial Services is that it increases its EPS. It’s nice to see. The fact that EPS is growing is a real plus for Provident Financial Services, but the good picture is better than that. Boasting both a modest CEO salary and considerable insider ownership, I’d say this one is at least worthy of the watchlist. Even so, know that Provident Financial Services shows 3 warning signs in our investment analysis , and 1 of them is a bit disturbing …
While Provident Financial Services certainly looks good to me, I would like more insiders to buy stocks. If you also like to see insider buying then this free list of growing companies that insiders buy, could be exactly what you are looking for.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
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