Investors are often guided by the idea of discovering ‘the next big thing’, even if that means buying ‘story stocks’ without any revenue, let alone profit. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Independent Bank (NASDAQ:IBCP). While this doesn’t necessarily speak to whether it’s undervalued, the profitability of the business is enough to warrant some appreciation – especially if its growing.

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Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it’s no surprise that some investors are more inclined to invest in profitable businesses. It’s good to see that Independent Bank’s EPS has grown from US$2.82 to US$3.18 over twelve months. This amounts to a 13% gain; a figure that shareholders will be pleased to see.

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. It’s noted that Independent Bank’s revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Independent Bank remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 8.6% to US$218m. That’s a real positive.

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.

See our latest analysis for Independent Bank

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Independent Bank’s forecast profits ?

It’s pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Independent Bank followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they hold US$15m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 2.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.