Enterprise Financial Services (EFSC)

Regional banking company Enterprise Financial Services (NASDAQ:EFSC) beat Wall Street’s revenue expectations in Q4 CY2025, with sales up 14.3% year on year to $193.6 million. Its non-GAAP profit of $1.36 per share was in line with analysts’ consensus estimates.

Company Overview

Starting as a single bank in Missouri in 1988 and expanding through strategic growth, Enterprise Financial Services (NASDAQ:EFSC) is a financial holding company that offers banking, lending, and wealth management services to businesses and individuals across seven states.

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.

Enterprise Financial Services competes with regional banks like UMB Financial (NASDAQ:UMBF), Commerce Bancshares (NASDAQ:CBSH), and First Midwest Bancorp (NASDAQ:FMBI), as well as larger national institutions in its specialty lending niches.

Net interest income and and fee-based revenue are the two pillars supporting bank earnings. The former captures profit from the gap between lending rates and deposit costs, while the latter encompasses charges for banking services, credit products, wealth management, and trading activities. Luckily, Enterprise Financial Services’s revenue grew at an excellent 16.9% compounded annual growth rate over the last five years. Its growth beat the average banking company and shows its offerings resonate with customers.

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. Enterprise Financial Services’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 5.9% over the last two years was well 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, Enterprise Financial Services reported year-on-year revenue growth of 14.3%, and its $193.6 million of revenue exceeded Wall Street’s estimates by 3.5%.

Net interest income made up 87.1% of the company’s total revenue during the last five years, meaning Enterprise Financial Services barely relies on non-interest income to drive its overall growth.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

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.

Markets emphasize efficiency ratio trends over static measurements, recognizing that revenue compositions drive different expense bases. Lower efficiency ratios signal superior performance by indicating that banks are controlling costs effectively relative to their income.

Over the last five years, Enterprise Financial Services’s efficiency ratio has increased by 7.1 percentage points, going from 57.5% to 58.5%. 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.

Enterprise Financial Services’s efficiency ratio came in at 59.2% this quarter, beating analysts’ expectations by 273.4 basis points (100 basis points = 1 percentage point). This result was in line with the same quarter last year.

For the next 12 months, Wall Street expects Enterprise Financial Services to become less profitable as it anticipates an efficiency ratio of 61.1%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Enterprise Financial Services’s EPS grew at an astounding 19.2% compounded annual growth rate over the last five years, higher than its 16.9% 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 shorter period to see if we are missing a change in the business.

For Enterprise Financial Services, its two-year annual EPS growth of 1.1% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, Enterprise Financial Services reported adjusted EPS of $1.36, up from $1.32 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Enterprise Financial Services’s full-year EPS of $5.24 to grow 5%.

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.

This is why 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. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

Enterprise Financial Services’s TBVPS grew at an incredible 10.2% annual clip over the last five years. The last two years show a similar trajectory as TBVPS grew by 10.5% annually from $33.85 to $41.37 per share.

Over the next 12 months, Consensus estimates call for Enterprise Financial Services’s TBVPS to grow by 10.2% to $45.60, mediocre 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, Enterprise Financial Services has averaged a Tier 1 capital ratio of 11.8%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Enterprise Financial Services has averaged an ROE of 11.5%, respectable for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired.

We enjoyed seeing Enterprise Financial Services beat analysts’ revenue expectations this quarter. We were also happy its net interest income narrowly outperformed Wall Street’s estimates. On the other hand, its EPS was in line. Zooming out, we think this was a mixed quarter. The stock remained flat at $56.02 immediately after reporting.

Updated: January 26, 2026 at 11:49 PM EST

Before investing in or passing on Enterprise Financial Services, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Enterprise Financial Services’s business quality ultimately falls short of our standards. Although its revenue growth was impressive over the last five years, it’s expected to deteriorate over the next 12 months and its declining net interest margin shows its loan book is becoming less profitable. And while the company’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its anticipated efficiency ratio over the next year signals its day-to-day expenses will rise.

Enterprise Financial Services’s P/B ratio based on the next 12 months is 1x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $64.75 on the company (compared to the current share price of $56.02).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.