Yahoo Finance Here's Why We Think First Republic Bank (NYSE:FRC) Is Well Worth Watching
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. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
In contrast to all that, I prefer to spend time on companies like First Republic Bank (NYSE:FRC), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
See our latest analysis for First Republic Bank
How Fast Is First Republic Bank Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. Over the last three years, First Republic Bank has grown EPS by 10% per year. That growth rate is fairly good, assuming the company can keep it up.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that First Republic Bank's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note First Republic Bank's EBIT margins were flat over the last year, revenue grew by a solid 12% to US$3.2b. 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.
While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for First Republic Bank?
Are First Republic Bank Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$19b company like First Republic Bank. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$180m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.
Is First Republic Bank Worth Keeping An Eye On?
As I already mentioned, First Republic Bank is a growing business, which is what I like to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Now, you could try to make up your mind on First Republic Bank by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
Although First Republic Bank certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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