The Fed just hiked rates by a further 0.75%, and more hikes may be in the offing. The broader indices are in bear territory and investors are finding it harder to find pockets of opportunity in the market.
In times of crisis, defensive names that offer a combination of capital preservation, a regular income stream, and possible market-beating returns can be good avenues for investors. This week, we are highlighting First Internet Bancorp (INBK), a name that has been consistently delivering for a while now.
Why INBK?
INBK is the holding company for First Internet Bank, and its top line has been consistently ticking upwards from $59.6 million in 2017 to $119.4 million in 2021. During this period, its earnings have almost doubled from $2.39 per share to $4.74 per share.
First Internet Bank is a leader in the branchless delivery of banking services and provides consumer and small business deposits, Small Business Administration (SBA) financing, franchise financing, various loans, and treasury management services.
INBK is witnessing growth in the franchise finance business, is able to drive lower-cost deposits, and maintains excellent credit quality. Impressively, it is undertaking fintech initiatives to position itself as a technology-forward digital financial services provider.
Moreover, the Tipranks comparison tool highlights that INBK’s share price returns have been better than some of its larger peers, including Bank of New York Mellon (BK), Goldman Sachs (GS), and JPMorgan Chase (JPM).
The Stock Is Quietly Gaining Attention
INBK has been slowly grabbing eyeballs from hedge funds, corporate insiders, bloggers, and Wall Street.
Hedge funds have increased holdings in the stock by 153,800 shares in the last quarter, indicating a very positive confidence signal in the stock. Importantly, hedge funds have been increasing holdings in INBK for three consecutive quarters now.
Moreover, four-star hedge fund manager Matthew Lindenbaum’s Basswood Capital Management has nearly doubled its holding in INBK to around $13 million.
Concurrently, insiders have bought INBK shares, which is a reassuring sign for investors at a time when markets are falling.
In the last three months, INBK insiders have bought shares worth $794,900. This also includes David B. Becker, the Chairman, CEO, and Director of the company, who scooped up INBK shares worth around $1.1 million last month.
The TipRanks insider trading tool indicates Becker has had a 50% success rate in the stock and has seen an average return of 31.1% per transaction.
Analysts Remain Bullish
Recently, Craig-Hallum’s George Sutton reiterated a Buy rating on the stock while decreasing the price target to $60 from $70.
Overall, the Street has a Strong Buy Consensus rating on INBK based on three unanimous Buys. The average INBK price target of $56 implies a potential upside of 52%.
This potential return is on top of the 0.68% dividend yield the stock currently offers. Most importantly, the company currently has a 4.82% payout ratio.
Simultaneously, TipRanks data also shows that INBK scores nine out of 10 on our smart score metric, meaning it is highly likely to outperform the broader market. Similarly, 100% of the bloggers are Bullish on INBK, compared to the sector average of 70%.
Finally, despite INBK’s relative outperformance over its peers, it is still available at less expensive metrics. The company has a return on equity of 13.59%, a P/E ratio of 7.2, and a P/S ratio of 2.11. This implies that investors can acquire INBK shares by paying about $2 for every sales dollar INBK generates.
Closing Note
INBK offers compelling investment metrics for potential investors, especially in the current market scenario. Moreover, gaining simultaneous positive sentiment from hedge funds, bloggers and Wall Street at a time when the broader market is in the bear territory is an impressive feat. INBK should definitely be on investors’ radar.
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