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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital – so investors should be cautious that they’re not throwing good money after bad.
If this kind of company isn’t your style, you like companies that generate revenue, and even earn profits, then you may well be interested in First Mid Bancshares (NASDAQ:FMBH). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide First Mid Bancshares with the means to add long-term value to shareholders.
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years First Mid Bancshares grew its EPS by 4.7% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.
One way to double-check a company’s growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Our analysis has highlighted that First Mid Bancshares’ 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. First Mid Bancshares maintained stable EBIT margins over the last year, all while growing revenue 17% to US$319m. That’s a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
NasdaqGM:FMBH Earnings and Revenue History January 24th 2025
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don’t always get it right.
In twelve months, insiders sold US$32k worth of First Mid Bancshares shares. But the silver lining to that cloud is that James Zimmer, the Independent Director, spent US$40k buying shares at an average price of US$39.87. And that’s a reason to be optimistic.
The good news, alongside the insider buying, for First Mid Bancshares 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$121m. This totals to 14% of shares in the company. Enough to lead management’s decision making process down a path that brings the most benefit to shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That’s because on our analysis the CEO, Joe Dively, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to First Mid Bancshares, with market caps between US$400m and US$1.6b, is around US$3.2m.
The CEO of First Mid Bancshares only received US$1.2m in total compensation for the year ending December 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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.
One positive for First Mid Bancshares is that it is growing EPS. That’s nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. You still need to take note of risks, for example – First Mid Bancshares has 1 warning sign we think you should be aware of.
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.
