WaFd Bank trades at $33.44 and has moved in lockstep with the market. Its shares have returned 12.7% over the last six months while the S&P 500 has gained 8.6%.
Is now the time to buy WaFd Bank, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think WaFd Bank Will Underperform?
We're cautious about WaFd Bank. Here are three reasons there are better opportunities than WAFD and a stock we'd rather own.
1. 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.
WaFd Bank’s net interest income has grown at a 6.9% annualized rate over the last five years, worse than the broader banking industry and in line with its total revenue.
2. Net Interest Margin Dropping
The net interest margin (NIM) is a key profitability indicator that measures the difference between what a bank earns on its loans and what it pays on its deposits. This metric measures how efficiently one can generate income from its core lending activities.
Over the past two years, WaFd Bank’s net interest margin averaged 2.6%. Its margin also contracted by 48.8 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 that WaFd Bank either faced competition for loans and deposits or experienced a negative mix shift in its balance sheet composition.
3. EPS Took a Dip Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Sadly for WaFd Bank, its EPS declined by 8.9% annually over the last two years while its revenue grew by 1.8%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
WaFd Bank falls short of our quality standards. That said, the stock currently trades at 0.9× forward P/B (or $33.44 per share). This multiple tells us a lot of good news is 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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