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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 OFG Bancorp (NYSE:OFG). 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.

View our latest analysis for OFG Bancorp

How Fast Is OFG Bancorp 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, OFG Bancorp has grown EPS by 22% 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 beaming.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It's noted that OFG Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. OFG Bancorp maintained stable EBIT margins over the last year, all while growing revenue 12% to US$557m. That's progress.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of OFG Bancorp's forecast profits?

Are OFG Bancorp Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The US$272k worth of shares that insiders sold during the last 12 months pales in comparison to the US$1.4m they spent on acquiring shares in the company. We find this encouraging because it suggests they are optimistic about OFG Bancorp'sfuture. Zooming in, we can see that the biggest insider purchase was by Independent Director Jorge Colon-Gerena for US$531k worth of shares, at about US$27.40 per share.

On top of the insider buying, it's good to see that OFG Bancorp insiders have a valuable investment in the business. Indeed, they hold US$27m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 2.0%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because OFG Bancorp's CEO, Jos Fernandez, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between US$1.0b and US$3.2b, like OFG Bancorp, the median CEO pay is around US$5.5m.

The OFG Bancorp CEO received US$3.0m in compensation for the year ending December 2021. 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 a culture of integrity, in a broader sense.

Should You Add OFG Bancorp To Your Watchlist?

For growth investors, OFG Bancorp's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. These things considered, this is one stock worth watching. You should always think about risks though. Case in point, we've spotted 2 warning signs for OFG Bancorp you should be aware of.

Keen growth investors love to see insider buying. Thankfully, OFG Bancorp 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.

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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.