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 completely lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in First Bancorp (NASDAQ:FBNC). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
How Quickly Is First Bancorp Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. First Bancorp managed to grow EPS by 4.1% per year, over three years. While that sort of growth rate isn't amazing, it does show the business is growing.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of First 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 Bancorp maintained stable EBIT margins over the last year, all while growing revenue 16% to US$301m. That's a real positive.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of First 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 First 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 First Bancorp shares worth a considerable sum. To be specific, they have US$35m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 2.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I'd say they are indeed. For companies with market capitalizations between US$1.0b and US$3.2b, like First Bancorp, the median CEO pay is around US$3.6m.
The First Bancorp CEO received total compensation of just US$1.1m in the year to . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. 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 a culture of integrity, in a broader sense.
Should You Add First Bancorp To Your Watchlist?
One important encouraging feature of First Bancorp is that it is growing profits. Earnings growth might be the main game for First Bancorp, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. You still need to take note of risks, for example - First Bancorp has 1 warning sign we think you should be aware of.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.
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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.