The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Bendigo and Adelaide Bank (ASX:BEN). 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.

See our latest analysis for Bendigo and Adelaide Bank

Bendigo and Adelaide Bank's Earnings Per Share Are 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Bendigo and Adelaide Bank has grown EPS by 19% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of Bendigo and Adelaide 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. While we note Bendigo and Adelaide Bank achieved similar EBIT margins to last year, revenue grew by a solid 6.2% to AU$1.8b. 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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Bendigo and Adelaide Bank's future EPS 100% free.

Are Bendigo and Adelaide Bank Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. 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.

It's nice to see that there have been no reports of any insiders selling shares in Bendigo and Adelaide Bank in the previous 12 months. Add in the fact that David Foster, the Independent Chairman of the Board of the company, paid AU$35k for shares at around AU$9.50 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Bendigo and Adelaide Bank.

On top of the insider buying, it's good to see that Bendigo and Adelaide Bank insiders have a valuable investment in the business. As a matter of fact, their holding is valued at AU$21m. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

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, Marnie Baker is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Bendigo and Adelaide Bank with market caps between AU$3.1b and AU$9.8b is about AU$3.3m.

The Bendigo and Adelaide Bank CEO received AU$2.6m in compensation for the year ending June 2023. That is actually below the median for CEO's of similarly 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 Bendigo and Adelaide Bank Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Bendigo and Adelaide Bank's strong EPS growth. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. So it's fair to say that this stock may well deserve a spot on your watchlist. However, before you get too excited we've discovered 2 warning signs for Bendigo and Adelaide Bank that you should be aware of.

The good news is that Bendigo and Adelaide Bank is not the only growth stock with insider buying. Here's a list of growth-focused companies in AU 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.

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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.