First Financial Bankshares currently trades at $33.65 per share and has shown little upside over the past six months, posting a small loss of 4%. The stock also fell short of the S&P 500’s 7.7% gain during that period.
Is there a buying opportunity in First Financial Bankshares, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is First Financial Bankshares Not Exciting?
We're sitting this one out for now. Here are three reasons why FFIN doesn't excite us 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, First Financial Bankshares’s revenue grew at a sluggish 5.3% compounded annual growth rate over the last five years. This was below our standard for the banking sector.
2. Net Interest Income Points to Soft Demand
Net interest income commands greater market attention due to its reliability and consistency, whereas one-time fees are often seen as lower-quality revenue that lacks the same dependable characteristics.
First Financial Bankshares’s net interest income has grown at a 7.4% annualized rate over the last five years, worse than the broader banking industry.
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 Financial Bankshares’s weak 4.7% 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 Financial Bankshares isn’t a terrible business, but it doesn’t pass our quality test. With its shares lagging the market recently, the stock trades at 2.3× forward P/B (or $33.65 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find more timely opportunities elsewhere. We’d suggest looking at a dominant Aerospace business that has perfected its M&A strategy.
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