If EPS Growth Is Important To You, Synovus Financial (NYSE:SNV) Presents An Opportunity

Stock Analysis

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

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 Synovus Financial (NYSE:SNV). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Synovus Financial

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Synovus Financial has managed to grow EPS by 20% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. Our analysis has highlighted that Synovus Financial's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Synovus Financial maintained stable EBIT margins over the last year, all while growing revenue 7.0% to US$2.2b. 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.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Synovus Financial?

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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Despite US$113k worth of sales, Synovus Financial insiders have overwhelmingly been buying the stock, spending US$490k on purchases in the last twelve months. An optimistic sign for those with Synovus Financial in their watchlist. It is also worth noting that it was CEO, President & Chairman Kevin Blair who made the biggest single purchase, worth US$121k, paying US$26.30 per share.

Along with the insider buying, another encouraging sign for Synovus Financial is that insiders, as a group, have a considerable shareholding. Holding US$60m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This should keep them focused on creating long term value for shareholders.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. The cherry on top is that the CEO, Kevin Blair 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 Synovus Financial with market caps between US$2.0b and US$6.4b is about US$6.8m.

Synovus Financial's CEO took home a total compensation package worth US$5.2m in the year leading up to December 2022. That seems pretty reasonable, especially given it's below the median for similar 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 a culture of integrity, in a broader sense.

You can't deny that Synovus Financial has grown its earnings per share at a very impressive rate. That's attractive. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. These things considered, this is one stock worth watching. What about risks? Every company has them, and we've spotted 1 warning sign for Synovus Financial you should know about.

Keen growth investors love to see insider buying. Thankfully, Synovus 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.

What are the risks and opportunities for Synovus Financial?

NYSE:SNV

Synovus Financial

Synovus Financial Corp. operates as the bank holding company for Synovus Bank that provides commercial and consumer banking products and services.Show more

Rewards

Trading at 59.7% below our estimate of its fair value

Earnings grew by 6.3% over the past year

Risks

Earnings are forecast to decline by an average of 5.4% per year for the next 3 years

Share Price

Market Cap

1Y Return

Further research onSynovus Financial

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.

Synovus Financial Corp. operates as the bank holding company for Synovus Bank that provides commercial and consumer banking products and services.

Very undervalued with flawless balance sheet and pays a dividend.