Fifth Third Bancorp (NASDAQ:FITB) Ticks All The Boxes When It Comes To Earnings Growth

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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Fifth Third Bancorp (NASDAQ:FITB). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Fifth Third Bancorp

How Quickly Is Fifth Third Bancorp Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Fifth Third Bancorp has managed to grow EPS by 22% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. It's noted that Fifth Third Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Fifth Third Bancorp remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 5.6% to US$8.2b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Fifth Third Bancorp?

Are Fifth Third Bancorp Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Although we did see some insider selling (worth US$610k) this was overshadowed by a mountain of buying, totalling US$1.8m in just one year. This adds to the interest in Fifth Third Bancorp because it suggests that those who understand the company best, are optimistic. Zooming in, we can see that the biggest insider purchase was by Independent Director Gary Heminger for US$1.3m worth of shares, at about US$26.82 per share.

The good news, alongside the insider buying, for Fifth Third Bancorp bulls is that insiders (collectively) have a meaningful investment in the stock. Holding US$83m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Fifth Third Bancorp's CEO, Tim Spence, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Fifth Third Bancorp, with market caps over US$8.0b, is about US$12m.

The Fifth Third Bancorp CEO received US$8.1m in compensation for the year ending December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does Fifth Third Bancorp Deserve A Spot On Your Watchlist?

For growth investors, Fifth Third Bancorp's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. These things considered, this is one stock worth watching. We don't want to rain on the parade too much, but we did also find 1 warning sign for Fifth Third Bancorp that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Fifth Third Bancorp, 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.