Over the past six months, FB Financial has been a great trade, beating the S&P 500 by 16.2%. Its stock price has climbed to $60.95, representing a healthy 26% increase. This performance may have investors wondering how to approach the situation.
Is there a buying opportunity in FB Financial, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is FB Financial Not Exciting?
We’re happy investors have made money, but we're swiping left on FB Financial for now. Here are three reasons you should be careful with FBK and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income.
Regrettably, FB Financial’s revenue grew at a weak 1.9% compounded annual growth rate over the last five years. This fell short of our benchmarks.
2. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
FB Financial’s weak 2.4% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
3. Substandard TBVPS Growth Indicates Limited Asset Expansion
We consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation.
To the detriment of investors, FB Financial’s TBVPS grew at a mediocre 8.6% annual clip over the last two years.
Final Judgment
FB Financial’s business quality ultimately falls short of our standards. With its shares beating the market recently, the stock trades at 1.4× forward P/B (or $60.95 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at one of our all-time favorite software stocks.
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