Does IF Bancorp (NASDAQ:IROQ) Deserve A Spot On Your Watchlist?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like IF Bancorp (NASDAQ:IROQ). 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.

Check out our latest analysis for IF Bancorp

IF Bancorp's Improving Profits

Over the last three years, IF Bancorp has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like a falcon taking flight, IF Bancorp's EPS soared from US$1.47 to US$1.93, over the last year. That's a commendable gain of 31%.

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. Not all of IF 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. While we note IF Bancorp's EBIT margins were flat over the last year, revenue grew by a solid 12% to US$27m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Since IF Bancorp is no giant, with a market capitalization of US$79m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are IF Bancorp Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We haven't seen any insiders selling IF Bancorp shares, in the last year. So it's definitely nice that Senior EVP & CLO Thomas Chamberlain bought US$9.6k worth of shares at an average price of around US$22.69.

On top of the insider buying, it's good to see that IF Bancorp insiders have a valuable investment in the business. To be specific, they have US$14m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 18% of the company, demonstrating a degree of high-level alignment with shareholders.

Does IF Bancorp Deserve A Spot On Your Watchlist?

For growth investors like me, IF Bancorp's raw rate of earnings growth is a beacon in the night. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So it's fair to say I think this stock may well deserve a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for IF Bancorp you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of IF 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.