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Does Greene County Bancorp (NASDAQ:GCBC) Deserve A Spot On Your Watchlist?

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·4 min read
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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. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Greene County Bancorp (NASDAQ:GCBC). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for Greene County Bancorp

How Quickly Is Greene County Bancorp Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, Greene County Bancorp has grown EPS by 19% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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 Greene County Bancorp'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 Greene County Bancorp's EBIT margins were flat over the last year, revenue grew by a solid 21% to US$67m. 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.

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

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Greene County Bancorp's balance sheet strength, before getting too excited.

Are Greene County Bancorp Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

In the last twelve months Greene County Bancorp insiders spent US$37k on stock; good news for shareholders. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling.

On top of the insider buying, it's good to see that Greene County Bancorp insiders have a valuable investment in the business. To be specific, they have US$30m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 6.7% of the company, demonstrating a degree of high-level alignment with shareholders.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Don Gibson is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations between US$200m and US$800m, like Greene County Bancorp, the median CEO pay is around US$2.6m.

Greene County Bancorp offered total compensation worth US$1.6m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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 Greene County Bancorp Worth Keeping An Eye On?

For growth investors like me, Greene County Bancorp's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. So I do think this is one stock worth watching. It is worth noting though that we have found 1 warning sign for Greene County Bancorp that you need to take into consideration.

The good news is that Greene County Bancorp is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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