Do Richmond Mutual Bancorporation's (NASDAQ:RMBI) Earnings Warrant Your Attention?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Richmond Mutual Bancorporation (NASDAQ:RMBI), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Richmond Mutual Bancorporation

Richmond Mutual Bancorporation's Improving Profits

In the last three years Richmond Mutual Bancorporation's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Richmond Mutual Bancorporation boosted its trailing twelve month EPS from US$1.04 to US$1.25, in the last year. There's little doubt shareholders would be happy with that 21% gain.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that Richmond Mutual Bancorporation's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Richmond Mutual Bancorporation achieved similar EBIT margins to last year, revenue grew by a solid 5.0% to US$46m. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Since Richmond Mutual Bancorporation is no giant, with a market capitalisation of US$126m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Richmond Mutual Bancorporation 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Insiders both bought and sold Richmond Mutual Bancorporation shares in the last year, but the good news is they spent US$41k more buying than they netted selling. So, on balance, the insider transactions are mildly encouraging. We also note that it was the Independent Director, Kathryn Girten, who made the biggest single acquisition, paying US$48k for shares at about US$9.73 each.

It's reassuring that Richmond Mutual Bancorporation insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. To be specific, the CEO is paid modestly when compared to company peers of the same size. Our analysis has discovered that the median total compensation for the CEOs of companies like Richmond Mutual Bancorporation with market caps under US$200m is about US$749k.

The Richmond Mutual Bancorporation CEO received US$674k in compensation for the year ending December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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. It can also be a sign of good governance, more generally.

Does Richmond Mutual Bancorporation Deserve A Spot On Your Watchlist?

As previously touched on, Richmond Mutual Bancorporation is a growing business, which is encouraging. And there's more to Richmond Mutual Bancorporation, with the insider buying and modest CEO pay being a great look for those with an eye on the company. All things considered, Richmond Mutual Bancorporation is certainly displaying its merits and is worthy of taking research to the next step. Still, you should learn about the 1 warning sign we've spotted with Richmond Mutual Bancorporation.

Keen growth investors love to see insider buying. Thankfully, Richmond Mutual Bancorporation isn't the only one. You can see a a free list of them here.

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.