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Here's Why We Think Richmond Mutual Bancorporation (NASDAQ:RMBI) Is Well Worth Watching

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·4 min read
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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In contrast to all that, I prefer to spend time on companies like Richmond Mutual Bancorporation (NASDAQ:RMBI), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Richmond Mutual Bancorporation

How Fast Is Richmond Mutual Bancorporation Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. It's good to see that Richmond Mutual Bancorporation's EPS have grown from US$0.84 to US$0.94 over twelve months. I doubt many would complain about that 12% gain.

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 Richmond Mutual Bancorporation'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. Richmond Mutual Bancorporation maintained stable EBIT margins over the last year, all while growing revenue 14% to US$44m. 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.

earnings-and-revenue-history
earnings-and-revenue-history

Richmond Mutual Bancorporation isn't a huge company, given its market capitalization of US$197m. That makes it extra important to check on its balance sheet strength.

Are Richmond Mutual Bancorporation Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Despite -US$59k worth of sales, Richmond Mutual Bancorporation insiders have overwhelmingly been buying the stock, spending US$329k on purchases in the last twelve months. You could argue that level of buying implies genuine confidence in the business. Zooming in, we can see that the biggest insider purchase was by Independent Director Harold Hanley for US$155k worth of shares, at about US$15.48 per share.

The good news, alongside the insider buying, for Richmond Mutual Bancorporation bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have US$12m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 6.1% of the company; visible skin in the game.

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. That's because on our analysis the CEO, Garry Kleer, is paid less than the median for similar sized companies. For companies with market capitalizations between US$100m and US$400m, like Richmond Mutual Bancorporation, the median CEO pay is around US$1.5m.

The CEO of Richmond Mutual Bancorporation only received US$642k in total compensation for the year ending . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. 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. I'd also argue reasonable pay levels attest to good decision making more generally.

Should You Add Richmond Mutual Bancorporation To Your Watchlist?

One important encouraging feature of Richmond Mutual Bancorporation is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist - and arguably a research priority. Still, you should learn about the 1 warning sign we've spotted with Richmond Mutual Bancorporation .

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Richmond Mutual Bancorporation, you'll probably love this free list of growing companies that insiders are buying.

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.