Here’s why I think First International Bank of Israel (TLV: FIBI) is an interesting stock
It’s only natural that many investors, especially those new to the game, would prefer to buy “hot” stocks with a good story, even if those companies are losing money. But as Peter Lynch put it in One Up on Wall Street, ‘Long shots hardly ever pay off.’
Contrary to all this, I prefer to spend time on companies like First International Bank of Israel (TLV: FIBI), which not only has income, but also profits. Even if stocks are fully valued today, most capitalists would recognize its benefits as a demonstration of constant value generation. While a well-funded business can suffer losses for years to come, unless its owners have an endless appetite to subsidize the customer, it will eventually have to generate a profit, or else take its last breath.
Check out our latest analysis for the First International Bank of Israel
How fast is the First International Bank of Israel growing?
The market is a short-term voting machine, but a long-term weighing machine, so the stock price eventually follows earnings per share (EPS). So it’s no surprise that I like to invest in companies with growing EPS. We can see that over the past three years, the First International Bank of Israel has increased its EPS by 15% per year. It’s a good rate of growth, if it can be sustained.
One way to check how a business is growing is to look at how its income and profit before interest and tax (EBIT) have changed. Not all First International Bank of Israel’s income this year is income operations, so keep in mind that the revenue and margin numbers I used might not be the best representation of the underlying business. The First International Bank of Israel has maintained stable EBIT margins over the past year, while increasing revenue by 14% to 4.3 billion yen. It’s really positive.
In the graph below, you can see how the business has increased its profit and revenue over time. Click on the graph to see the exact numbers.
While profitability is the driving force behind the upswing, cautious investors are always checking the balance sheet as well.
Are the early insiders of the International Bank of Israel aligned with all the shareholders?
Generally, I think it’s worth considering how much the CEO is paid, as unreasonably high rates could be viewed as being against the interests of shareholders. I found that the median total compensation of CEOs of companies like the First International Bank of Israel with market caps between 6.2 billion yen and 20 billion yen is around 4.7 million yen.
The First International Bank of Israel offered total compensation worth 3.4 million yen to its CEO in the year to. This is lower than the average for similar sized companies and seems pretty reasonable to me. CEO compensation levels aren’t the most important metric for investors, but when the salary is modest, it promotes better alignment between the CEO and common shareholders. It can also be a sign of good governance, more generally.
Is Israel’s First International Bank Worth Watching?
As I mentioned before, First International Bank of Israel is a growing company, that’s what I like to see. Not only that, but the CEO is paid quite reasonably which gives me more confidence in the board. So I think the title deserves further research, if not an instant addition to your watchlist. However, before you get too excited, we found out 1 warning sign for Israel’s first international bank that you need to be aware of.
While the First International Bank of Israel certainly looks good to me, I would like more insiders to buy stocks. If you also like to see insiders buy, then this free list of growing companies that insiders are buying, might be exactly what you are looking for.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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