Here's Why We Think First Financial Bancorp (NASDAQ:FFBC) Is Well Worth Watching

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like First Financial Bancorp (NASDAQ:FFBC). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for First Financial Bancorp

How Fast Is First Financial Bancorp Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. First Financial Bancorp managed to grow EPS by 4.4% per year, over three years. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of First Financial Bancorp's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. First Financial Bancorp maintained stable EBIT margins over the last year, all while growing revenue 7.0% to US$673m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Fortunately, we've got access to analyst forecasts of First Financial 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 Financial Bancorp Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that First Financial Bancorp insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at US$45m. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 2.2% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations between US$1.0b and US$3.2b, like First Financial Bancorp, the median CEO pay is around US$5.4m.

The First Financial Bancorp CEO received US$3.1m in compensation for the year ending December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add First Financial Bancorp To Your Watchlist?

One important encouraging feature of First Financial Bancorp is that it is growing profits. The fact that EPS is growing is a genuine positive for First Financial Bancorp, but the pleasant picture gets better than that. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. However, before you get too excited we've discovered 2 warning signs for First Financial Bancorp that you should be aware of.

The beauty of investing is that you can invest in almost 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.