November 27, 2021

Remarkable Mate

Remarkable business & finance

Here’s Why I Think Village Bank and Trust Financial (NASDAQ:VBFC) Might Deserve Your Attention Today

It’s only natural that many investors, especially those who are new to the game, prefer to buy shares in ‘sexy’ stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?’ Leuz et. al. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.

In contrast to all that, I prefer to spend time on companies like Village Bank and Trust Financial (NASDAQ:VBFC), which has not only revenues, but also profits. While profit is not necessarily a social good, it’s easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Village Bank and Trust Financial’s Improving Profits

Over the last three years, Village Bank and Trust Financial has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don’t think the percent growth rate is particularly meaningful. As a result, I’ll zoom in on growth over the last year, instead. Like the last firework on New Year’s Eve accelerating into the sky, Village Bank and Trust Financial’s EPS shot from US$4.68 to US$8.96, over the last year. Year on year growth of 92% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

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 Village Bank and Trust Financial’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. Village Bank and Trust Financial maintained stable EBIT margins over the last year, all while growing revenue 40% to US$40m. 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.

NasdaqCM:VBFC Earnings and Revenue History November 16th 2021

Village Bank and Trust Financial isn’t a huge company, given its market capitalization of US$85m. That makes it extra important to check on its balance sheet strength.

Are Village Bank and Trust Financial 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

It’s good to see Village Bank and Trust Financial insiders walking the walk, by spending US$297k on shares in just twelve months. When you contrast that with the complete lack of sales, it’s easy for shareholders to brim with joyful expectancy. We also note that it was the , Kenneth Lehman, who made the biggest single acquisition, paying US$131k for shares at about US$34.00 each.

On top of the insider buying, we can also see that Village Bank and Trust Financial insiders own a large chunk of the company. Indeed, with a collective holding of 62%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term – something I like to see. With that sort of holding, insiders have about US$53m riding on the stock, at current prices. That’s nothing to sneeze at!

Does Village Bank and Trust Financial Deserve A Spot On Your Watchlist?

Village Bank and Trust Financial’s earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. Just as heartening; insiders both own and are buying more stock. Because of the potential that it has reached an inflection point, I’d suggest Village Bank and Trust Financial belongs on the top of your watchlist. Don’t forget that there may still be risks. For instance, we’ve identified 1 warning sign for Village Bank and Trust Financial that you should be aware of.

As a growth investor I do like to see insider buying. But Village Bank and Trust Financial 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

https://www.nasdaq.com/articles/heres-why-i-think-village-bank-and-trust-financial-nasdaq%3Avbfc-might-deserve-your