Pathward Financial (CASH)

Financial services company Pathward Financial (NASDAQ:CASH) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, with sales up 3.9% year on year to $186.7 million. Its GAAP profit of $1.69 per share was 21.6% above analysts’ consensus estimates.

Company Overview

Formerly known as Meta Financial until its 2022 rebranding, Pathward Financial (NASDAQ:CASH) provides banking-as-a-service solutions and commercial finance products, enabling partners to offer financial services like prepaid cards, payment processing, and lending options.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Pathward Financial competes with other banking-as-a-service providers like The Bancorp (NASDAQ:TBBK), Sutton Bank (private), and WebBank (private). In the commercial finance space, its competitors include regional banks, specialized lenders like Marlin Business Services (NASDAQ:MRLN), and larger financial institutions that offer similar lending products.

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. Thankfully, Pathward Financial’s 11.8% annualized revenue growth over the last five years was excellent. Its growth surpassed the average banking company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Pathward Financial’s annualized revenue growth of 9.5% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Pathward Financial reported modest year-on-year revenue growth of 3.9% but beat Wall Street’s estimates by 2.4%.

Net interest income made up 57.4% of the company’s total revenue during the last five years, meaning Pathward Financial’s growth drivers strike a balance between lending and non-lending activities.

Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.

Topline growth carries importance, but the overall profitability behind this expansion determines true value creation. For banks, the efficiency ratio captures this relationship by measuring non-interest expenses, including salaries, facilities, technology, and marketing, against total revenue.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, Pathward Financial’s efficiency ratio has increased by 1.6 percentage points, going from 64.1% to 68.6%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

In Q3, Pathward Financial’s efficiency ratio was 77.5%, falling short of analysts’ expectations by 493.9 basis points (100 basis points = 1 percentage point). This result was 3.3 percentage points worse than the same quarter last year.

For the next 12 months, Wall Street expects Pathward Financial to rein in some of its expenses as it anticipates an efficiency ratio of 65.9%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Pathward Financial’s EPS grew at an astounding 22.3% compounded annual growth rate over the last five years, higher than its 11.8% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Pathward Financial, its two-year annual EPS growth of 15.2% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, Pathward Financial reported EPS of $1.69, up from $1.34 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Pathward Financial’s full-year EPS of $7.98 to grow 7.2%.

Banks profit by intermediating between depositors and borrowers, making them fundamentally balance sheet-driven enterprises. Market participants emphasize balance sheet quality and sustained book value growth when evaluating these institutions.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. On the other hand, EPS is often distorted by mergers and flexible loan loss accounting. TBVPS provides clearer performance insights.

Pathward Financial’s TBVPS grew at an incredible 10.9% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 39.9% annually over the last two years from $12.28 to $24.02 per share.

Over the next 12 months, Consensus estimates call for Pathward Financial’s TBVPS to grow by 23.4% to $29.64, elite growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Pathward Financial has averaged a Tier 1 capital ratio of 12.6%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Pathward Financial has averaged an ROE of 22.1%, exceptional for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows Pathward Financial has a strong competitive moat.

It was good to see Pathward Financial beat analysts’ EPS expectations this quarter. We were also glad its tangible book value per share outperformed Wall Street’s estimates. On the other hand, its net interest income missed. Overall, while it was not a perfect quarter, we think it was a solid one with some key areas of upside. The stock traded up 1.8% to $73 immediately following the results.

Updated: December 3, 2025 at 11:41 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Pathward Financial.

Pathward Financial is truly a cream-of-the-crop banking company. First of all, the company’s revenue growth was good over the last five years. And while its estimated net interest income for the next 12 months are weak, its admirable net interest margin a wonderful starting point for the overall profitability of the business. Additionally, Pathward Financial’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders.

Pathward Financial’s P/B ratio based on the next 12 months is 1.7x. Analyzing the banking landscape today, Pathward Financial’s positive attributes shine bright. We think it’s one of the best businesses in our coverage and like the stock at this price.

Wall Street analysts have a consensus one-year price target of $88 on the company (compared to the current share price of $74.11), implying they see 18.7% upside in buying Pathward Financial in the short term.