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.
Fool contributor Alex Dumortier, CFA, has no position in any stocks mentioned; you can follow him on Twitter: @longrunreturns. The Motley Fool recommends and owns shares of BofI Holding. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.