FirstSun Capital Bancorp has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 14.4% to $38.56 per share while the index has gained 13.3%.
Is now the time to buy FirstSun Capital Bancorp, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free for active Edge members.
Why Is FirstSun Capital Bancorp Not Exciting?
We're swiping left on FirstSun Capital Bancorp for now. Here are three reasons we avoid FSUN and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
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.
Unfortunately, FirstSun Capital Bancorp’s 8.5% annualized revenue growth over the last five years was mediocre. This was below our standard for the banking sector.
2. Net Interest Margin Dropping
Net interest margin (NIM) represents the unit economics of a bank by measuring the profitability of its interest-bearing assets relative to its interest-bearing liabilities. It's a fundamental metric that investors use to assess lending premiums and returns.
Over the past two years, FirstSun Capital Bancorp’s net interest margin averaged 4.1%. However, its margin contracted by 23.3 basis points (100 basis points = 1 percentage point) over that period.
This decline was a headwind for its net interest income. While prevailing rates are a major determinant of net interest margin changes over time, the decline could mean FirstSun Capital Bancorp either faced competition for loans and deposits or experienced a negative mix shift in its balance sheet composition.
3. TBVPS Projections Show Stormy Skies Ahead
A bank’s tangible book value per share (TBVPS) increases when it generates higher net interest margins and keeps credit losses low, allowing it to compound shareholder value over time.
Over the next 12 months, Consensus estimates call for FirstSun Capital Bancorp’s TBVPS to shrink by 4% to $35.43, a sour projection.
Final Judgment
FirstSun Capital Bancorp isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 0.9× forward P/B (or $38.56 per share). 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. We’d recommend looking at the most entrenched endpoint security platform on the market.
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