Over the past six months, Republic Bancorp has been a great trade, beating the S&P 500 by 10.5%. Its stock price has climbed to $91.18, representing a healthy 22.5% increase. This run-up might have investors contemplating their next move.
Is now the time to buy Republic 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.
Why Is Republic Bancorp Not Exciting?
Despite the momentum, we’re sitting this one out for now. Here are three reasons why there are better opportunities than RBCAA, plus one stock we’d rather own.
1. Net Interest Income Points to Soft Demand
While banks generate revenue from multiple sources, investors view net interest income as a cornerstone — its predictable, recurring characteristics stand in sharp contrast to the volatility of one-time fees.
Republic Bancorp’s net interest income has grown at a 5.9% 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 rise by 4.9%, close to its 5.1% annualized growth for the past two years.
3. Projected TBVPS Growth Is Slim
The key to tangible book value per share (TBVPS) growth is a bank’s ability to earn consistent returns on its assets that exceed its funding costs and credit losses.
Over the next 12 months, Consensus estimates call for Republic Bancorp’s TBVPS to grow by 7.8% to $61.31, a paltry growth rate.
Final Judgment
Republic Bancorp isn’t a terrible business, but it doesn’t pass our bar. With its shares topping the market in recent months, the stock trades at 1.5× forward P/B (or $91.18 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We’re fairly confident there are better stocks to buy right now. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Like More Than Republic Bancorp
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