Republic Bancorp has been treading water for the past six months, recording a small return of 1.1% while holding steady at $72.95.
Is now the time to buy Republic Bancorp, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Republic Bancorp Not Exciting?
We're sitting this one out for now. Here are three reasons why RBCAA doesn't excite us and a stock we'd rather own.
1. Net Interest Income Points to Soft Demand
Our experience and research show the market cares primarily about a bank’s net interest income growth as one-time fees are considered a lower-quality and non-recurring revenue source.
Republic Bancorp’s net interest income has grown at a 7.6% annualized rate over the last five years, worse than the broader banking industry. Its growth was driven by both an increase in its outstanding loans and net interest margin, which represents how much a bank earns in relation to its outstanding loan book.
2. Projected Net Interest Income Growth Is Slim
Forecasted net interest income by Wall Street analysts signals a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Republic Bancorp’s net interest income to drop by 1.9%, a decrease from its 7.7% annualized growth for the past two years. This projection is below its 7.7% annualized growth rate for the past two years.
3. Projected TBVPS Growth Is Slim
Tangible book value per share (TBVPS) growth comes from a bank’s ability to profitably lend while maintaining prudent risk management and efficient operations.
Over the next 12 months, Consensus estimates call for Republic Bancorp’s TBVPS to grow by 7.4% to $58.37, lousy growth rate.
Final Judgment
Republic Bancorp isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at $72.95 per share (or a forward price-to-sales ratio of 0×). The market typically values companies like Republic Bancorp based on their anticipated profits for the next 12 months, but it expects the business to lose money. We also think the upside isn’t great compared to the potential downside here - there are more exciting stocks to buy. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.
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