Republic Bancorp has had an impressive run over the past six months as its shares have beaten the S&P 500 by 13.2%. The stock now trades at $91.12, marking a 21.6% gain. 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? See what our analysts have to say in our full research report, it’s free.
Why Is Republic Bancorp Not Exciting?
We’re glad investors have benefited from the price increase, but we don’t have much confidence in Republic Bancorp. Here are three reasons you should be careful with RBCAA, plus one 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.
Republic Bancorp’s net interest income has grown at a 5.4% annualized rate over the last five years, much 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 3.9%, close to its 4.9% annualized growth 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 8% to $60.16, paltry growth rate.
Final Judgment
Republic Bancorp isn’t a terrible business, but it doesn’t pass our bar. With its shares outperforming the market lately, the stock trades at 1.5× forward P/B (or $91.12 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We’re fairly confident there are better stocks to buy right now. Let us point you toward our favorite semiconductor picks and shovels play.
Stocks We Would Buy Instead of Republic Bancorp
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