Should You Be Adding Bancorp (NASDAQ:TBBK) To Your Watchlist Today?

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Bancorp (NASDAQ:TBBK), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Bancorp with the means to add long-term value to shareholders.

See our latest analysis for Bancorp

How Fast Is 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. Shareholders will be happy to know that Bancorp's EPS has grown 33% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. Our analysis has highlighted that Bancorp's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Bancorp achieved similar EBIT margins to last year, revenue grew by a solid 12% to US$464m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of 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 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Although we did see some insider selling (worth US$1.7m) this was overshadowed by a mountain of buying, totalling US$2.8m in just one year. This adds to the interest in Bancorp because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was Independent Director Matthew Cohn who made the biggest single purchase, worth US$683k, paying US$38.32 per share.

The good news, alongside the insider buying, for Bancorp bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$116m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because on our analysis the CEO, Damian Kozlowski, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to Bancorp, with market caps between US$2.0b and US$6.4b, is around US$6.7m.

Bancorp's CEO took home a total compensation package worth US$5.8m in the year leading up to December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Bancorp Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Bancorp's strong EPS growth. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. Astute investors will want to keep this stock on watch. Now, you could try to make up your mind on Bancorp by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Keen growth investors love to see insider activity. Thankfully, Bancorp isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by high insider ownership.

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.