Here’s Why We Think Hvidbjerg Bank (CPH:HVID) Is Well Worth Watching – Yahoo Finance

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you’re like me, you might be more interested in profitable, growing companies, like Hvidbjerg Bank (CPH:HVID). While profit is not necessarily a social good, it’s easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Hvidbjerg Bank

How Fast Is Hvidbjerg Bank Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Hvidbjerg Bank has grown EPS by 23% 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.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company’s growth. Not all of Hvidbjerg Bank’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. Hvidbjerg Bank maintained stable EBIT margins over the last year, all while growing revenue 22% to ø86m. That’s a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

Hvidbjerg Bank isn’t a huge company, given its market capitalization of ø99m. That makes it extra important to check on its balance sheet strength.

Are Hvidbjerg Bank Insiders Aligned With All Shareholders?

As a general rule, I think it worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalizations under ø1.4b, like Hvidbjerg Bank, the median CEO pay is around ø3.1m.

The Hvidbjerg Bank CEO received ø1.9m in compensation for the year ending December 2019. That seems pretty reasonable, especially given its below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Is Hvidbjerg Bank Worth Keeping An Eye On?

You can’t deny that Hvidbjerg Bank has grown its earnings per share at a very impressive rate. That’s attractive. With swiftly growing earnings, it probably has its best days ahead, and the modest CEO pay suggests the company is careful with cash. So I’d venture it may well deserve a spot on your watchlist, or even a little further 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 Hvidbjerg Bank is trading on a high P/E or a low P/E, relative to its industry.