Here's Why I Think Old National Bancorp (NASDAQ:ONB) Might Deserve Your Attention Today
It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Old National Bancorp (NASDAQ:ONB). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
See our latest analysis for Old National Bancorp
How Quickly Is Old National Bancorp Increasing Earnings Per Share?
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). That makes EPS growth an attractive quality for any company. It certainly is nice to see that Old National Bancorp has managed to grow EPS by 29% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
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. I note that Old National Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Old National Bancorp's EBIT margins were flat over the last year, revenue grew by a solid 11% to US$845m. That's progress.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of Old National Bancorp's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Old National Bancorp Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Old National Bancorp shares worth a considerable sum. Indeed, they hold US$31m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 1.0% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like Old National Bancorp with market caps between US$2.0b and US$6.4b is about US$5.2m.
Old National Bancorp offered total compensation worth US$3.7m to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Should You Add Old National Bancorp To Your Watchlist?
For growth investors like me, Old National Bancorp's raw rate of earnings growth is a beacon in the night. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. Each to their own, but I think all this makes Old National Bancorp look rather interesting indeed. Now, you could try to make up your mind on Old National Bancorp by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
Although Old National Bancorp certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
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.
