Pathward Financial (CASH)

Financial services company Pathward Financial (NASDAQ:CASH) missed Wall Street’s revenue expectations in Q4 CY2025, with sales flat year on year at $173.1 million. Its GAAP profit of $1.57 per share was 13.8% 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 11.5% annualized revenue growth over the last five years was decent. Its growth was slightly above the average banking company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Pathward Financial’s recent performance shows its demand has slowed as its annualized revenue growth of 7.4% over the last two years was below its five-year trend. 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 missed Wall Street’s estimates and reported a rather uninspiring 0.9% year-on-year revenue decline, generating $173.1 million of revenue.

Net interest income made up 57.8% 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.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

Topline growth is certainly important, but the overall profitability of this growth matters for the bottom line. For banks, we look at efficiency ratio, which is non-interest expense (salaries, rent, IT, marketing, excluding interest paid out to depositors) as a percentage of 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 2.8 percentage points, going from 60.9% to 67.5%. 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.

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 20.7% compounded annual growth rate over the last five years, higher than its 11.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Pathward Financial, its two-year annual EPS growth of 21% is similar to its five-year trend, implying strong and stable earnings power.

In Q4, Pathward Financial reported EPS of $1.57, up from $1.23 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 $8.21 to grow 7.1%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. 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 11.6% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 26.2% annually over the last two years from $15.41 to $24.54 per share.

Over the next 12 months, Consensus estimates call for Pathward Financial’s TBVPS to grow by 23.1% to $30.20, 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 12.5%, 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 22.2%, 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. On the other hand, its revenue missed and its net interest income fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $79.90 immediately following the results.

Updated: January 22, 2026 at 11:19 PM EST

Before deciding whether to buy Pathward Financial or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

There is a lot to like about Pathward Financial. First of all, the company’s revenue growth was good over the last five years. And while its projected EPS for the next year is lacking, 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 1.8x. Scanning the banking landscape today, Pathward Financial’s fundamentals clearly illustrate that it’s an elite business, and we like it 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 $79.90), implying they see 10.1% upside in buying Pathward Financial in the short term.