Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of bank holding company BofI (NYSE:AX) were up 14% at 2:26 p.m. ET on Tuesday after the company reported record profits of $12.2 million in its fiscal first quarter ended Sept. 30, driven by a 27% increase in its loan portfolio and lower loan loss provisions.
So what: It's not all that surprising that BofI's stock popped today -- it's tough to find anything to nitpick in the online bank's earnings release, as the numbers look very solid across the board. On the bottom line, BofI's earnings-per-share rose 33% year-on-year to $0.85, in line with analysts' forecast. That growth was consistent with the 31% increase in the bank's core earnings, which excludes gains and losses on its securities portfolio.
The bank's net interest margin rose from 3.70% in the year-ago quarter to 3.86%, and average earnings assets increased $483 million (for reference, total assets are $3.28 billion). Combine that with a whopping 81% fall in the loan loss provision to $0.5 million, and you're off to a good start when it comes to bottom-line profitability.
Now what: As of Monday's close, BofI's shares have returned 120% year-to-date and investors may be wondering if those gains are sustainable. However, at 16.6 times the next 12 months' earnings-per-share estimate, the stock doesn't look particularly expensive for a well-managed growth company that is putting up the sort of numbers contained in today's report. Investors thinking about purchasing the shares could wait for a better entry point, but I don't see a problem in opening a position at today's prices, assuming you wish to become a long-term shareholder.