Do First Internet Bancorp's (NASDAQ:INBK) Earnings Warrant Your Attention?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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 First Internet Bancorp (NASDAQ:INBK). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for First Internet Bancorp

First Internet Bancorp's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that First Internet Bancorp has managed to grow EPS by 33% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Our analysis has highlighted that First Internet Bancorp's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note First Internet Bancorp achieved similar EBIT margins to last year, revenue grew by a solid 24% to US$124m. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for First Internet Bancorp's future EPS 100% free.

Are First Internet Bancorp Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We do note that, in the last year, insiders sold US$85k worth of shares. But that's far less than the US$2.9m insiders spent purchasing stock. This bodes well for First Internet Bancorp as it highlights the fact that those who are important to the company having a lot of faith in its future. It is also worth noting that it was Chairman & CEO David Becker who made the biggest single purchase, worth US$1.1m, paying US$36.42 per share.

On top of the insider buying, it's good to see that First Internet Bancorp insiders have a valuable investment in the business. To be specific, they have US$28m worth of shares. This considerable investment should help drive long-term value in the business. Those holdings account for over 7.7% of the company; visible skin in the game.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, David Becker is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to First Internet Bancorp, with market caps between US$200m and US$800m, is around US$2.8m.

The First Internet Bancorp CEO received US$1.9m in compensation for the year ending December 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Does First Internet Bancorp Deserve A Spot On Your Watchlist?

You can't deny that First Internet Bancorp has grown its earnings per share at a very impressive rate. That's attractive. Furthermore, company insiders have been adding to their significant stake in the company. These things considered, this is one stock worth watching. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if First Internet Bancorp is trading on a high P/E or a low P/E, relative to its industry.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.