Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
In contrast to all that, I prefer to spend time on companies like First Internet Bancorp (NASDAQ:INBK), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Fast Is First Internet Bancorp Growing Its Earnings Per Share?
Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. First Internet Bancorp has grown its trailing twelve month EPS from US$2.31 to US$2.51, in the last year. That amounts to a small improvement of 8.9%.
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. Not all of First Internet Bancorp'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. First Internet Bancorp maintained stable EBIT margins over the last year, all while growing revenue 9.9% to US$74m. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for First Internet Bancorp?
Are First Internet Bancorp Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.
The good news for First Internet Bancorp shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that Independent Director Jerry Williams bought US$21k worth of shares at an average price of around US$21.11.
The good news, alongside the insider buying, for First Internet Bancorp bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have US$13m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 4.9% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Is First Internet Bancorp Worth Keeping An Eye On?
One positive for First Internet Bancorp is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of First Internet Bancorp.
The good news is that First Internet Bancorp is not the only growth stock with insider buying. Here's a list of them... 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
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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