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 currently lacks a track record of revenue and profit. 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. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Northeast Bank (NASDAQ:NBN). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Northeast Bank has grown EPS by 9.0% per year. That growth rate is fairly good, assuming the company can keep it up.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of Northeast Bank's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for Northeast Bank remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 25% to US$184m. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
NasdaqGM:NBN Earnings and Revenue History May 22nd 2025
Are Northeast Bank Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
We do note that, in the last year, insiders sold US$543k worth of shares. But that's far less than the US$2.4m insiders spent purchasing stock. This adds to the interest in Northeast Bank because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was President Richard Wayne who made the biggest single purchase, worth US$654k, paying US$64.52 per share.
Along with the insider buying, another encouraging sign for Northeast Bank is that insiders, as a group, have a considerable shareholding. Given insiders own a significant chunk of shares, currently valued at US$97m, they have plenty of motivation to push the business to succeed. Amounting to 13% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Rick Wayne, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to Northeast Bank, with market caps between US$400m and US$1.6b, is around US$4.0m.
The Northeast Bank CEO received US$3.2m in compensation for the year ending June 2024. That is actually below the median for CEO's of similarly sized companies. 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. It can also be a sign of good governance, more generally.
Should You Add Northeast Bank To Your Watchlist?
One important encouraging feature of Northeast Bank is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Northeast Bank is trading on a high P/E or a low P/E, relative to its industry.
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.
