Commerce Bancshares has been treading water for the past six months, recording a small return of 4.6% while holding steady at $51.97.

Is there a buying opportunity in Commerce Bancshares, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Commerce Bancshares Not Exciting?

We're cautious about Commerce Bancshares. Here are three reasons we avoid CBSH 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, Commerce Bancshares’s revenue grew at a sluggish 6% 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

Markets consistently prioritize net interest income over non-recurring fees, recognizing its superior quality compared to the more unpredictable revenue streams.

Commerce Bancshares’s net interest income has grown at a 6.5% annualized rate over the last five years, worse than the broader banking industry and in line with its total revenue.

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 Commerce Bancshares’s TBVPS to grow by 10.9% to $29.64, mediocre growth rate.

Final Judgment

Commerce Bancshares isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 1.6× forward P/B (or $51.97 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.

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