Here's Why Summit Financial Group (NASDAQ:SMMF) Has Caught The Eye Of Investors
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.
In contrast to all that, many investors prefer to focus on companies like Summit Financial Group (NASDAQ:SMMF), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Summit Financial Group with the means to add long-term value to shareholders.
View our latest analysis for Summit Financial Group
How Fast Is Summit Financial Group 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. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Summit Financial Group has managed to grow EPS by 17% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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 Summit Financial Group'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. Summit Financial Group maintained stable EBIT margins over the last year, all while growing revenue 11% to US$140m. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Since Summit Financial Group is no giant, with a market capitalisation of US$252m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Summit Financial Group 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Despite US$23k worth of sales, Summit Financial Group insiders have overwhelmingly been buying the stock, spending US$572k on purchases in the last twelve months. An optimistic sign for those with Summit Financial Group in their watchlist. We also note that it was the Independent Director, Jason Kitzmiller, who made the biggest single acquisition, paying US$199k for shares at about US$21.75 each.
On top of the insider buying, it's good to see that Summit Financial Group insiders have a valuable investment in the business. As a matter of fact, their holding is valued at US$33m. That's a lot of money, and no small incentive to work hard. Those holdings account for over 13% of the company; visible skin in the game.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Summit Financial Group's CEO, Charlie Maddy, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Summit Financial Group with market caps between US$100m and US$400m is about US$1.7m.
Summit Financial Group offered total compensation worth US$1.0m to its CEO in the year to December 2022. 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. It can also be a sign of good governance, more generally.
Does Summit Financial Group Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Summit Financial Group's strong EPS growth. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. Before you take the next step you should know about the 1 warning sign for Summit Financial Group that we have uncovered.
Keen growth investors love to see insider buying. Thankfully, Summit Financial Group 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.
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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