Here's Why We Think Five Star Bancorp (NASDAQ:FSBC) Might Deserve Your Attention Today

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. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Five Star Bancorp (NASDAQ:FSBC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Five Star Bancorp with the means to add long-term value to shareholders.

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Five Star Bancorp's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Five Star Bancorp boosted its trailing twelve month EPS from US$2.25 to US$2.68, in the last year. That's a 19% gain; respectable growth in the broader scheme of things.

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 Five Star Bancorp's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Five Star Bancorp achieved similar EBIT margins to last year, revenue grew by a solid 25% to US$142m. That's encouraging news for the company!

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.

Check out our latest analysis for Five Star Bancorp

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Five Star Bancorp?

Are Five Star Bancorp Insiders Aligned With All Shareholders?

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. So it is good to see that Five Star Bancorp insiders have a significant amount of capital invested in the stock. Notably, they have an enviable stake in the company, worth US$182m. This totals to 23% 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.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. The median total compensation for CEOs of companies similar in size to Five Star Bancorp, with market caps between US$400m and US$1.6b, is around US$3.4m.

The Five Star Bancorp CEO received total compensation of just US$1.5m in the year to December 2024. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Should You Add Five Star Bancorp To Your Watchlist?

One important encouraging feature of Five Star Bancorp is that it is growing profits. The growth of EPS may be the eye-catching headline for Five Star Bancorp, but there's more to bring joy for shareholders. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Five Star Bancorp is trading on a high P/E or a low P/E, relative to its industry.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by significant insider holdings.

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.