Is Now The Time To Put First Interstate BancSystem (NASDAQ:FIBK) On Your Watchlist?

By
Simply Wall St
Published
January 12, 2022
NasdaqGS:FIBK
Source: Shutterstock

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.

In contrast to all that, I prefer to spend time on companies like First Interstate BancSystem (NASDAQ:FIBK), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 First Interstate BancSystem

First Interstate BancSystem's Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. It's good to see that First Interstate BancSystem's EPS have grown from US$2.59 to US$3.02 over twelve months. That's a 17% gain; respectable growth in the broader scheme of things.

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 First Interstate BancSystem's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. First Interstate BancSystem maintained stable EBIT margins over the last year, all while growing revenue 5.0% to US$638m. 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
NasdaqGS:FIBK Earnings and Revenue History January 12th 2022

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

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that First Interstate BancSystem insiders have a significant amount of capital invested in the stock. Notably, they have an enormous stake in the company, worth US$687m. That equates to 25% of the company, making insiders powerful and aligned with other shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.

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$2.0b and US$6.4b, like First Interstate BancSystem, the median CEO pay is around US$5.1m.

First Interstate BancSystem offered total compensation worth US$2.9m to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Does First Interstate BancSystem Deserve A Spot On Your Watchlist?

One important encouraging feature of First Interstate BancSystem is that it is growing profits. Earnings growth might be the main game for First Interstate BancSystem, but the fun does not stop there. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. Now, you could try to make up your mind on First Interstate BancSystem 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 First Interstate BancSystem 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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