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. 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 Oak Valley Bancorp (NASDAQ:OVLY). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Oak Valley Bancorp with the means to add long-term value to shareholders.

Check out our latest analysis for Oak Valley Bancorp

How Fast Is Oak Valley 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. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, Oak Valley Bancorp has achieved impressive annual EPS growth of 41%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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 Oak Valley Bancorp'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. EBIT margins for Oak Valley Bancorp remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 46% to US$85m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Oak Valley Bancorp isn't a huge company, given its market capitalisation of US$229m. That makes it extra important to check on its balance sheet strength.

Are Oak Valley Bancorp Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Oak Valley Bancorp followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they hold US$44m worth of its stock. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 19% of the shares on issue for the business, an appreciable amount considering the market cap.