Over the past six months, First Bancorp has been a great trade, beating the S&P 500 by 9%. Its stock price has climbed to $55.41, representing a healthy 20.5% increase. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in First Bancorp, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is First Bancorp Not Exciting?
We’re happy investors have made money, but we're sitting this one out for now. Here are three reasons why FBNC doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions.
Over the last five years, First Bancorp grew its revenue at a mediocre 8.2% compounded annual growth rate. This fell short of our benchmark for the banking sector.
3. 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.
First Bancorp’s unimpressive 6.5% annual EPS growth over the last five years aligns with its revenue performance. On the bright side, this tells us its incremental sales were profitable.
Final Judgment
First Bancorp isn’t a terrible business, but it isn’t one of our picks. With its shares outperforming the market lately, the stock trades at 1.4× forward P/B (or $55.41 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better investments elsewhere. We’d suggest looking at the most entrenched endpoint security platform on the market.
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